Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By creating free market efficiencies without any need for regulation
B
By necessitating subsidies to support producers that benefit third parties
C
By reducing the overall supply of goods in the market
D
By allowing producers to monopolize the market without competition
Understanding the Answer
Let's break down why this is correct
Answer
Positive externalities in production occur when a company's activities benefit others who are not directly involved in the production process. For example, if a factory invests in cleaner technology, it not only improves its own efficiency but also reduces pollution, benefiting the entire community. Because these benefits are not reflected in the market price, the government may step in to encourage such behavior, often through subsidies or tax incentives. This intervention aims to promote more positive outcomes in society, ensuring that businesses consider the wider impact of their actions. Ultimately, by supporting positive externalities, the government helps create a healthier environment and a stronger economy for everyone.
Detailed Explanation
When producers create benefits for others, the government may give them money to keep doing it. Other options are incorrect because Some think that positive effects mean no rules are needed; It's a common mistake to think that good effects reduce supply.
Key Concepts
Positive externalities in production
Government subsidies
Market efficiencies
Topic
Positive Externalities in Production
Difficulty
easy level question
Cognitive Level
understand
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