Question

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by:

Answer 1

Answer:

Providing a subsidy to correct for an underallocation of resources.

Explanation:

In Economics, subsidy can be defined as the amount of money or benefits such as tax reduction given by the government to sellers in order to sustain production and enable the buy to continuously purchase the product.

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by providing a subsidy to correct for an underallocation of resources such as capital, land and labor used for production of these products.