Practice Questions
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How do government subsidies typically affect producer welfare in a market with positive externalities?
Subsidies help producers by giving them extra money. Other options are incorrect because Some might think subsidies lower prices, hurting producers; I...
How do government subsidies for private goods impact the free market when considering externalities?
Subsidies can lead to too much production of certain goods. Other options are incorrect because Some might think subsidies remove all problems caused ...
How do government subsidies aimed at reducing the cost of production for certain industries affect positive externalities and producer welfare?
Subsidies help producers lower their costs. Other options are incorrect because This answer suggests that subsidies hurt producers; This option claims...
How do government subsidies address negative externalities while maximizing social benefits?
Subsidies help businesses by giving them money. Other options are incorrect because Some might think that raising production costs helps society; It's...
How do government subsidies aimed at promoting positive externalities of private goods impact social costs in an economy?
Subsidies help lower the cost of goods that are good for everyone. Other options are incorrect because Some think that government programs always wast...
What is the primary purpose of government subsidies in an economy?
Government subsidies help businesses produce more goods and services. Other options are incorrect because Some might think subsidies help the governme...
What is one primary reason governments provide subsidies to businesses in the presence of positive externalities?
Governments give money to businesses to help them do good things. Other options are incorrect because Some might think subsidies help the government e...
Which of the following is an example of a positive externality that may result from government subsidies?
When the government gives money for education, more people can learn. Other options are incorrect because This option shows a negative effect; This op...
Government subsidies always lead to an increase in overall welfare without any unintended consequences, such as market distortions or dependency on subsidies.
Subsidies can help some people, but they can also cause issues. Other options are incorrect because Some think subsidies are always good; This suggest...
Which of the following scenarios best illustrates the impact of government subsidies in correcting externalities?
The farmer gets money to plant trees. Other options are incorrect because This option shows a factory cutting safety, which creates more harm; Here, a...
How do government subsidies effectively address the issue of externalities in a market?
Subsidies help lower the costs for producers. Other options are incorrect because Some might think subsidies just boost demand; It's a common belief t...
Which of the following statements accurately describe the role of government subsidies in addressing externalities? Select all that apply.
Other options are incorrect because This statement suggests subsidies always help lower costs for good activities; This option implies that subsidies ...
Government subsidies aim to correct market failures by aligning _____ with social costs, thus encouraging the production of goods that have positive externalities.
Subsidies help match what producers pay to make goods with the true cost to society. Other options are incorrect because Total fixed costs are the cos...
Government subsidies are to externalities as tax incentives are to what?
Tax incentives help improve social welfare by encouraging good behavior. Other options are incorrect because Some might think tax incentives balance t...
If the government implements a subsidy for planting trees, what is the primary reason this action is taken?
The government gives money to help plant trees because it wants to make it cheaper for people. Other options are incorrect because Some might think su...
Arrange the following steps in the correct order to illustrate how government subsidies can internalize externalities and promote social welfare.
The government first sees a problem in the market. Other options are incorrect because This answer suggests that consumers react to the subsidy before...
A local government decides to implement a subsidy for urban tree planting to combat air pollution. After the subsidy is introduced, the number of trees planted increases significantly. Which of the following best explains how this subsidy addresses the externalities associated with urban air quality?
The subsidy helps people pay for planting trees. Other options are incorrect because This option suggests that people are forced to plant trees; This ...
How do government subsidies aim to correct market failures related to externalities?
Subsidies help cover costs that businesses don't pay for, like pollution. Other options are incorrect because Some might think raising prices helps re...
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