When a Positive Externality Exists in the Production of a Good

question 168

Multiple Choice

When a positive externality exists in the production of a good,

• A)subsidizing the production of the good could correct for the externality.
• B)government could correct for the externality by shifting the good's supply curve to the left.
• C)an appropriate policy would result in a decrease in the price of the good.
• D)an appropriate policy would result in a decrease in the good's output.
• E)taxing the production of the good could correct for the externality.

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Definitions:

Revenues

Income generated from business activities or services before any expenses are deducted.

Expenses

Costs incurred in the operation of a business or the execution of a task.

Trust Accounts

Financial accounts held by a trustee for the benefit of a third party according to the terms of a trust agreement.

Gross Earnings

The total amount of money earned by an individual or company before any deductions such as taxes or benefits.