Homework Answers
C) subsidy
Through offering incentives for products or services that produce spillover benefits, the Government may play a role in promoting positive externalities. A government subsidy is a benefit that essentially reduces the cost of a given product or service being made. These subsidies provide companies with an incentive to increase the production of goods and provide positive externalities. And, as the spillover benefits go to society, government subsidies are a way for society to share the burden of creating positive externalities. Society, after all, pays the taxes which fund the subsidies. With regard to education, as the government subsidizes public education, a larger amount of education is generated and consumed, and society is reaping the benefits of spillover.
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