Which of the following policies addresses the problem posed by ...

[ghost!]

Which of the following policies addresses the problem posed by positive externalities?
 
  A) a subsidy to the agent that generates the positive externality
  B) a tax on the agent that generates the positive externality
  C) limit the activity that generates the positive externality
  D) a subsidy to the agents that benefit from the positive externality

Question 2

In the presence of a negative externality, a specific tax can achieve the social optimum because
 
  A) output is reduced to zero as a result.
  B) it internalizes the external cost.
  C) it directly charges the producer for polluting.
  D) the price of the good rises by the full amount of the tax.

[shayla]

Answer to Question 1

A

Answer to Question 2

B