in-a-market-with-a-positive-externality-how-does-a-subsidy-affect-the-equilibriu

Question

In a market with a positive externality, how does a subsidy affect the equilibrium quantity?

Accepted Answer

It increases the equilibrium quantity by lowering the effective price for consumers.

Answer

It has no effect on the equilibrium quantity.

Answer

It decreases the equilibrium quantity by raising the effective price for consumers.

Answer

It decreases the equilibrium quantity by reducing demand.