Final answer:
A Pigouvian subsidy is a form of government intervention that rewards producers for positive externalities by providing financial incentives. This helps to align production with overall societal welfare.
Step-by-step explanation:
A Pigouvian subsidy is a form of government intervention that is designed to correct negative externalities, such as pollution, by providing financial incentives to producers. When a Pigouvian subsidy is provided, producers are rewarded for positive externalities. This means that producers receive financial assistance or subsidies for creating goods or services that have positive effects on society, such as reducing pollution or promoting sustainable practices.By providing this subsidy, the government aims to encourage producers to internalize the positive externalities and align their production with the overall welfare of society. The subsidy reduces the costs of production for producers, making it more profitable for them to produce goods or services that have positive social benefits.In conclusion, option (b) is correct: When a Pigouvian subsidy is provided, producers are rewarded for positive externalities.