What is one primary reason governments provide subsidies to businesses in the presence of positive externalities?

Governments provide subsidies to businesses when there are positive externalities because these externalities create benefits for society that the businesses alone might not be able to capture. For instance, when a company invests in renewable energy, it not only makes a profit but also helps reduce pollution and combat climate change, which benefits everyone. However, the company may not receive enough financial reward for these broader benefits, leading to less investment in such projects. By offering subsidies, the government encourages more businesses to engage in activities that have positive impacts on society. This support helps align private profits with public good, ensuring that society as a whole can enjoy the advantages of these beneficial activities.