Question
A Pigovian subsidy __________.
ensures that external costs are minimized
exists when marginal social benefits exceed marginal social costs
maximizes internal costs
encourages activities that create external benefits
ensures that external costs are minimized
exists when marginal social benefits exceed marginal social costs
maximizes internal costs
encourages activities that create external benefits
Answers
GPT-4o mini
A Pigovian subsidy **encourages activities that create external benefits**.
Pigovian subsidies are designed to encourage positive externalities, which are benefits that affect third parties who do not directly participate in the economic transaction. By providing a subsidy for activities that generate these external benefits, such as education, vaccination, or renewable energy production, the government aims to align private incentives with social benefits.
Pigovian subsidies are designed to encourage positive externalities, which are benefits that affect third parties who do not directly participate in the economic transaction. By providing a subsidy for activities that generate these external benefits, such as education, vaccination, or renewable energy production, the government aims to align private incentives with social benefits.