Which of the following is an example of a restriction that the government places on the use of business property to address externalities?

• A. Tax incentives for business investment
• B. Price controls on consumer goods
• C. Zoning laws that limit the types of businesses allowed in certain areas
• D. Subsidies for research and development

Answer: (C)

Verified step by step guidance

1. Understand the concept of externalities: Externalities occur when a third party is affected by the actions of others, either positively or negatively, without compensation. Governments often intervene to correct these market failures.
2. Identify the role of government restrictions on business property: Restrictions such as zoning laws are used to limit or control how businesses can use their property to reduce negative externalities (e.g., noise, pollution) or promote positive externalities.
3. Analyze each option in the context of externalities and property use: Tax incentives and subsidies are financial tools to encourage certain behaviors, while price controls regulate consumer prices, not property use.
4. Recognize that zoning laws directly restrict the use of business property by limiting the types of businesses allowed in certain areas, which helps manage externalities like noise, traffic, or environmental impact.
5. Conclude that zoning laws are an example of a government restriction on business property aimed at addressing externalities, unlike the other options which serve different economic purposes.