Which of the following government interventions is most appropriate to correct the market failure caused by positive externalities?

CA Foundation · Business Economics · MTP · January 2025
Which of the following government interventions is most appropriate to correct the market failure caused by positive externalities?
(A) A. Implementing taxes on consumption of the good
(B) B. Subsidizing the production of the good
(C) C. Imposing strict regulations on production
(D) D. Reducing government spending on the good

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. Subsidizing the production of the good

Topics: Public Finance

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