To Encourage Consumption of a Good That Generates Positive Externalities,the

question 163

Multiple Choice

To encourage consumption of a good that generates positive externalities,the BEST option for policymakers would be to:

• A)impose a tax on the amount consumed to achieve the socially optimal level.
• B)mandate consumption of the good at the socially optimal level.
• C)provide a subsidy per unit of the good consumed to achieve the socially optimal level.
• D)do nothing since the market will achieve the socially optimal level without government intervention.

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Definitions:

Production Increase

The rise in the quantity of goods produced by a company or economy over a specific time period.

Direct Manufacturing Cost

Expenses directly related to the production of goods, including raw materials and labor directly involved in manufacturing.

Units Produced

The total number of complete units of product or outputs produced by a company or production process.

Direct Costs

Costs that can be directly traced to producing specific goods or services, such as raw materials and labor.