One way to reach the Pareto efficient level of an activity that generates a positive externality...
One way to reach the Pareto efficient level of an activity that generates a positive externality is to
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ban the activity. |
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| subsidize the activity | |
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tax the activity. |
Homework Answers
Ans) Positive externality is when the bystander bears the benefit of any activity. Here, quantity produced by the market is less than socially desirable quantity. So, to internalise this externality, government gives subsidy equal to the external benefit. This subsidy decreases the price and increases the quantity. Eg- education
Option b.
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One way to reach the Pareto efficient level of an activity that
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