question archive In a situation in which property rights are not well-defined and social costs exceed private costs, government can use all of the following to induce producers to bring private costs into alignment with social costs EXCEPT A
In a situation in which property rights are not well-defined and social costs exceed private costs, government can use all of the following to induce producers to bring private costs into alignment with social costs EXCEPT A
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In a situation in which property rights are not well-defined and social costs exceed private costs, government can use all of the following to induce producers to bring private costs into alignment with social costs EXCEPT
A. regulation of production B. taxing production C. subsidization of production D. coercive limits on production
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The government will use all the ways except 'Subsidization of production'
If the social costs exceed private costs, the good is said to have a negative externality. There is over production of the said good. The good is produced more than what the society needs. In order to induce producers to align private costs with social costs, the government will use any policy that aims at reducing the production of the good. Such ways include
- Regulation of production
- Taxing production
- Placing coercive limits on production
Subsidies are given by the government inorder to encourage production. Subsidies are offered where there are positive externalities.
