Question

current objective
understand how subsidies can be a solution to positive externalities and illustrate this graphically
question
all of the following statements about subsidies and positive externalities are true, except:
select the correct answer below:
the government should not want the party creating the positive externality to receive a greater share of the social
benefits.
in the case of vaccines, an effective government public policy might be to provide a subsidy to those who choose
to get vaccinated.
when the government uses a subsidy to those who choose to get vaccinated, it can produces the socially optimal
quantity of vaccinations.
none of the above; all of the statements are true.

Explanation:

• Statement 1: The government often wants the party creating positive externality (like getting vaccinated) to receive a share of social benefits as it encourages more of that activity. So, the statement "The government should not want the party creating the positive externality to receive a greater share of the social benefits" is false.
• Statement 2: Vaccines have positive externalities (less spread of disease benefits society). A subsidy for those getting vaccinated can increase the number of vaccinations, which is a valid policy.
• Statement 3: A well - designed subsidy for vaccinations can account for the positive externality (the benefit to society beyond the individual's benefit) and lead to the socially optimal quantity of vaccinations.

Answer:

The government should not want the party creating the positive externality to receive a greater share of the social benefits.