question archive Which of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits? a) Government subsidies b) Pigouvian taxes c) Public provision d) Coase taxes e) a or b f) None of the above
Which of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits? a) Government subsidies b) Pigouvian taxes c) Public provision d) Coase taxes e) a or b f) None of the above
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Which of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits?
a) Government subsidies
b) Pigouvian taxes
c) Public provision
d) Coase taxes
e) a or b
f) None of the above
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The answer is a) Government subsidies.
- By using government subsidies, governments can change the long-run behavior of a market by favoring certain producers that would otherwise go out of business. The Pigouvian taxes are also efficient but are only used in markets with negative externalities.
