Question

To correct for positive externalities, the government should

A. do nothing, since no harm is done by positive externalities

B. levy a tax on the output of the good or service

C. pay a subsidy equal to the marginal external benefit

D. impose a price ceiling on the good to discourage its production

E. impose a price floor on the good at which the marginal private benefit equals the marginal social cost

Answer 1

C

Step-by-step explanation:

If you pay the subsidy to the externalities, the issues are solved.

Answer 2

C. Pay a subsidy equal to the marginal external benefit