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Which of the following statements is TRUE?I. A Pigouvian subsidy reduces the market price to encourage consumption and correct for the underproduction of a good.II. A Pigouvian tax increases the market price to discourage consumption and correct for the overproduction of a good.III. Negative externalities create deadweight losses, but positive externalities do not.  I, II, and III I only III only I and II only

Question
Which of the following statements is TRUE?
I. A Pigouvian subsidy reduces the market price to encourage consumption and correct for the underproduction of a good.
II. A Pigouvian tax increases the market price to discourage consumption and correct for the overproduction of a good.
III. Negative externalities create deadweight losses, but positive externalities do not.
 
  I, II, and III
  I only
  III only
 

I and II only

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Both I and II are true. 3rd statement is not true as deadweight loss can also occur is positive externality as the market so...

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