Suppose That Candy Producers Create a Positive Externality Equal to $1

question 110

Multiple Choice

Suppose that candy producers create a positive externality equal to $1 per pound of candy. Further suppose that the government offers a $1-per-pound subsidy to the producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of candy?

• A)The equilibrium quantity is greater than the socially optimal quantity.
• B)The equilibrium quantity is less than the socially optimal quantity.
• C)They are equal.
• D)There is not enough information to answer the question.

---

Definitions:

Location Specificity

The importance and impact of a geographical location on a business's operations, strategy, and success.

Company Specificity

The unique characteristics and strategies that distinguish a particular company from its competitors.

Subsidiary Human Capital

Company knowledge within a specific location.

Sustainable Energy Sources

Sources of energy that are renewable and have low environmental impact, providing a means to meet present energy needs without compromising the ability of future generations to meet theirs.