Final answer:
All remedies for externalities aim to move the allocation of resources toward the socially optimal equilibrium, addressing market inefficiencies to align private costs or benefits with social costs or benefits.
Step-by-step explanation:
All remedies for externalities share the goal of b. moving the allocation of resources toward the socially optimal equilibrium. Externalities, whether positive or negative, cause market failure because the market does not allocate resources efficiently on its own.
Therefore, remedies aim to correct this inefficiency by aligning the private interests of individuals or firms with the public interest. This is done by either internalizing the externality or through government intervention to achieve a more socially desirable outcome where the marginal social benefit equals the marginal social cost.
For instance, in the case of negative externalities like pollution, a possible remedy could be imposing a tax on the polluter equivalent to the external cost. This shifts the supply curve to reflect the true cost of production, ultimately moving the market toward a more socially optimal level of output that accounts for the external costs. Similarly, with positive externalities such as education, subsidies can encourage more consumption or production, pushing the market towards a socially optimal equilibrium.
In terms of economic equality and efficiency, there exists a trade-off. Actions that move towards greater equality, such as subsidies or taxes, can impact economic output, but the goal is to strike a balance that benefits society as a whole. This is exemplified by choices along a budget constraint or production possibilities that result in allocative efficiency, maximizing social welfare without unnecessary waste of resources.