Questions: Multiple Select Question Select all that apply Which two of the following are ways for the government to correct for external costs? Emission fees Increasing the quantity of the good that generates the external cost Regulations Subsidies

The correct answers are:

• Emission fees: These are charges imposed on the quantity of pollution that a firm emits. By making it more costly to pollute, emission fees incentivize firms to reduce their emissions, thereby addressing the external costs associated with pollution.

• Regulations: Governments can implement regulations that limit the amount of pollution or set standards for emissions. These regulations directly control the level of external costs by mandating reductions in harmful activities.

Explanation for other options:

• Increasing the quantity of the good that generates the external cost: This would likely exacerbate the problem by increasing the external costs, rather than correcting them.

• Subsidies: These are typically used to encourage positive externalities, not to correct negative externalities. Subsidizing a good that generates external costs would likely increase its production and associated negative impacts.