A government decides to implement a subsidy for electric vehicles to encourage their consumption. Classify the impact of this subsidy on market equilibrium in terms of marginal private cost, marginal private benefit, and potential externalities. Which of the following categories best describes the outcome?

When a government provides a subsidy for electric vehicles, it lowers the cost for consumers, which means the marginal private cost of buying these vehicles decreases. This encourages more people to purchase electric vehicles, increasing the marginal private benefit since consumers feel they are getting a good deal. As more electric vehicles are sold, there can be positive externalities, such as reduced air pollution and lower greenhouse gas emissions, benefiting society as a whole. Overall, the subsidy shifts the market equilibrium to a higher quantity of electric vehicle sales, making them more accessible and promoting environmental benefits. In this situation, the outcome can be classified as a positive impact on both private and social welfare.