Question

Which of the following policies is the government most inclined to use when faced with a positive externality?

1) Subsidies
2) Taxes
3) Regulations
4) Privatization

Answer 1

The government is most inclined to use subsidies when faced with a positive externality. A subsidy is a public policy tool that reduces the cost of a good or service for consumers by providing financial assistance.

Step-by-step explanation:

The government is most inclined to use subsidies when faced with a positive externality. A subsidy is a public policy tool that reduces the cost of a good or service for consumers by providing financial assistance. By providing a subsidy to the party creating the positive externality, the government can help them receive a greater share of the social benefits. For example, in the case of vaccines like flu shots, the government may provide subsidies to encourage more people to get vaccinated.