Economics · Microeconomics

An external benefit (positive externality) is most likely to arise when:

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1A firm disposes of industrial waste into rivers free of charge.
2The government subsidizes public commuter transport, leading to reduced traffic congestion for all commuters.✓
3A reduction in tax on profits increases the internal investment funds of a firm.
4Firms are able to reduce their costs of production by undertaking research and development.

Correct answer

The government subsidizes public commuter transport, leading to reduced traffic congestion for all commuters.

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