Products with positive externalities are under-consumed, thus creating a market failure. How can the government correct this failure?
I. By taxing the output of the product to increase tax revenue.
II. By paying subsidies to the producers to lower the cost of the product to potential buyers.
III. By reducing the marginal social benefit of the product, thus eliminating the externality.
IV. By requiring producers to manufacture more of the product.
V. By producing it themselves and distributing it free or at very low cost to consumers.
All statements are correct.
Only statements I, III and IV are correct.
Only statements III and IV are correct.
Only statements II and V are correct.
Only statements I and IV are correct.
I. By taxing the output of the product to increase tax revenue.
II. By paying subsidies to the producers to lower the cost of the product to potential buyers.
III. By reducing the marginal social benefit of the product, thus eliminating the externality.
IV. By requiring producers to manufacture more of the product.
V. By producing it themselves and distributing it free or at very low cost to consumers.
All statements are correct.
Only statements I, III and IV are correct.
Only statements III and IV are correct.
Only statements II and V are correct.
Only statements I and IV are correct.