Question 1
In the presence of ________ externalities, too much of the good is produced and in the presence of ________ externalities, too little of the good is produced.
◦ positive; negative
◦ negative; positive
◦ positive; no
◦ no; negative
Question 2
If the government wishes to encourage firms to internalize externalities, they should tax activities resulting in ________ externalities and subsidize activities resulting in ________ externalities.
◦ negative; positive
◦ positive; negative
◦ no; positive
◦ negative; no