What resource problem is created by positive externalizes and what methods are suggested for dealing with this problem?
Please provide the best answer for the statement.
When there are positive externalizes from the production process, this causes an under allocation of resources to the production of a product. The reason for the under allocation is that the firm is not receiving all the benefit from producing the product. Some of the benefits spill over to a third party. The four suggested ways for correcting for this under allocation of resources are: (1) private bargaining; (2) a subsidy to consumers; (3) a subsidy to producers; and (4) government provision of the product.
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