If the production of a good generates external ________, the government could increase efficiency by ________ production of the good.

A) benefits; taxing
B) benefits; subsidizing
C) costs; subsidizing
D) costs; increasing

External Costs

Costs caused by a business activity that are not borne by the business itself, but by other people or the environment.

External Benefits

Benefits from an economic activity experienced by parties not directly involved in the transaction, often leading to positive spillovers in society.

Subsidizing Production

The act of providing financial support to companies or industries to reduce the cost of producing goods or services, often to encourage production or lower prices for consumers.