Question

. In a certain city, the local government regulates the destruction of historic buildings and provides tax breaks to owners of historic buildings who restore them. These government policies a. reflect the fact that restored historic buildings convey a positive externality. b. reflect the fact that the destruction of historic buildings conveys a positive externality. c. are likely to worsen the market failure that is associated with historic buildings and the restoration of such buildings. d. are likely to decrease the well-being of society as a whole.

Answer 1

ANSWER- the correct answer is;

(A) reflect the fact that restored historic buildings convey a positive externality.

A postive externality refers to a situation in which a person or individual gets some benefits,from a economic transaction, in which he doesn't involve. In other words a third person enjoys advantage from a transaction.

Historic buildings are the heritage of a nation or society. Whole society or nation feels pride on seeing such establishments. The Tax breaks given to individuals is, to encourage them for maintaining and restoring such historic heritage sites, so that the third party (society or nation) gets benefit from it.