Question

Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except:

A. Taxing the sellers of the product
B. Subsiding the buyers of the product
C. Subsidizing the sellers of the product
D. Providing the product itself

Answer 1

Answer:

The correct answer is letter "A": Taxing the sellers of the product.

Explanation:

The product optimal level is reached when the demand of the products meets the supply available. In the case a government wants to elicit this scenario to happen, the government should avoid imposing tariffs on that product because it will cause the price to go up, which will decrease the quantity of demand for that good.