A positive externality exists and government wants to apply a per-unit subsidy in order to bring about an efficient outcome. Under what condition will the solution (the subsidy) be worse than the problem (the market failure)?
A) Under the condition that the subsidy is greater than the marginal external benefit (associated with the positive externality).
B) Under the condition that the post-subsidy output is not farther away from the efficient level of output than the pre-subsidy output is from the efficient level of output.
C) Under the condition that the post-subsidy output is farther away from the efficient level of output than the pre-subsidy output is from the efficient level of output.
D) Under the condition that the subsidy is less than the marginal external benefit (associated with the positive externality).
E) none of the above
C
You might also like to view...
According to this Application, over the past few years there has been a ________ increase in ________ of automobile parts from outside the United States and Canada
A) large; imports B) large; exports C) small; imports D) small; exports
Buying a diversified mutual stock fund allows you to
A) completely avoid all types of risk. B) avoid only random, unsystematic risk. C) avoid only systematic risk. D) avoid risk only when all the stock prices are perfectly correlated.
All of the following questions or statements regarding tariffs are positive except
A) Economic models can be used to estimate the dollar amounts gained by the winners from the imposition of a tariff. B) Economic analysis can decide whether a tariff proposal should be enacted. C) Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff. D) Economic models can be used to estimate the dollar amounts lost by the losers from the imposition of a tariff.
Which of the following statements is true as a result of Federal Reserve efforts to rescue the financial industry from the financial crisis of 2007 and 2008?
A. From February 2008 to May 2009, the Fed oversaw the consolidation of 20 major financial institutions into fewer than a dozen. B. From March 2008 to February 2009, the Fed experienced a 50 percent decline in the value of assets held. C. From February 2008 to March 2009, Fed assets more than doubled to nearly $2 trillion. D. From February 2008 to March 2009, Fed lending caused the U.S. public debt to rise by over $1 trillion.