If the consumption of a good involves a positive externality, what can be done to encourage consumers to consume more of the good?
What will be an ideal response?
If the consumption of a good involves a positive externality, the marginal social benefit derived from the good exceeds the marginal private benefit. However, the consumers of the good do not take this additional benefit into consideration and continue consuming only as long as the marginal private benefit from consumption exceeds the marginal private cost. In this case, if the consumption of the good is subsidized, the marginal private benefit from consumption will increase, causing consumers to consume more.
You might also like to view...
The relative price of a magazine in the above figure is
A) 0.5 of a hamburger per magazine. B) 1 hamburger per magazine. C) 1.33 hamburgers per magazine. D) 8 hamburgers per magazine.
When economies of scale are present, the LRAC curve touches each short-run ATC curve
A) to the left of the ATC curve's minimum point. B) to the right of the ATC curve's minimum point. C) at the ATC curve's minimum point. D) at no points.
According to rent-seeking theory, which group is most likely to benefit from representative democracy?
a. consumers b. taxpayers c. the poor d. children e. lawyers
If a change in technology improves the marginal productivity of capital, the
a. supply of capital will increase b. supply of capital will decrease c. demand for loanable funds will increase d. demand for loanable funds will decrease e. supply of loanable funds will increase