The most accurate statement about the government's role in controlling externalities in the American economy is:
Government tries to encourage positive externalities and limit negative externalities.
In general, externalities occur when the actions of individuals or businesses have effects (positive or negative) on third parties that are not reflected in market prices.
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Positive externalities are benefits that affect others (e.g., education, public parks), and the government may encourage them through subsidies, tax incentives, or public provision of goods and services.
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Negative externalities impose costs on others (e.g., pollution), and the government may limit them through regulations, taxes (like carbon taxes), or creating legal frameworks to hold offenders accountable.
Thus, the government aims to balance these effects to enhance overall economic efficiency and social welfare.