Question

The devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits include all of the following except

A) intellectual property rights.
B) subsidies.
C) public production.
D) pollution permits.
E) patents.

Answer 1

Pollution permits are not designed to address external benefits, unlike intellectual property rights, subsidies, and public production, which all aim to encourage the efficient allocation of resources towards goods with positive externalities.

Step-by-step explanation:

Among the devices the government can use to achieve a more efficient allocation of resources in the presence of external benefits, pollution permits do not encourage the allocation of resources towards goods with positive externalities. Instead, they are designed to efficiently allocate resources in the presence of negative externalities, like pollution. Intellectual property rights, such as patents, on the other hand, are aimed at increasing the incentives to innovate by protecting new inventions, ensuring that inventors can profit from their work, and encouraging more investment in R&D. Subsidies and public production are also means by which the government can encourage an efficient allocation of resources for goods that provide external benefits to society. Therefore, the correct answer is pollution permits, which do not directly aim at addressing external benefits.