Question
A Pigovian subsidy __________.
exists when marginal social benefits exceed marginal social costs
encourages activities that create external benefits
discourages activities that create external costs
maximizes internal costs
exists when marginal social benefits exceed marginal social costs
encourages activities that create external benefits
discourages activities that create external costs
maximizes internal costs
Answers
GPT-4o mini
A Pigovian subsidy **encourages activities that create external benefits.**
Pigovian subsidies are intended to promote behaviors that have positive effects on third parties not accounted for in the market transactions, thus addressing the issue of external benefits.
Pigovian subsidies are intended to promote behaviors that have positive effects on third parties not accounted for in the market transactions, thus addressing the issue of external benefits.