Question

If the production of a good results in a positive externality, the government might be able...

If the production of a good results in a positive externality, the government might be able to improve economic efficiency in this market by

eliminating private production of the good

imposing a tax on private producers

promoting the export of the surplus output

initiating antitrust action

granting a subsidy to private producers
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Answer #1

Option E :- granting a subsidy to private producers

  • If the production of a good results in a positive externality, the government might be able to improve economic efficiency in this market by granting a subsidy to private producers
  • When there is positive externality the government tries to improve the efficiency of market.
  • They allow subsidy to private producers.
  • This boost the economic efficiency.
  • The subsidy helps the private sector to boost production and sales.

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