What is the government’s response to the positive externalities?
Governments greatly support external benefits and do many things to support companies who provide these positive externalities. The two general ways the government uses to promote these positive externalities are increasing the supply of and demand for the goods, services or resources who generate these positive externalities.
One of the ways the government uses to increase supply is provide subsidies to the producers of the goods, services or resources which generates positive externalities. They do this to encourage increased supply through reducing their production cost. Governments also generally remove taxes for these goods to further encourage the producers.
As stated previously, governments also try to increase the demand for goods. One of the ways they do this is by reducing the cost of the goods or providing subsidies to the consumers as well. In some cases, governments even make the goods free for consumers, with examples of these being healthcare and education. Of course, these aren't the only ways that are used to increase demand. There is also advertising. The government generally uses media to raise awareness of the importance of these goods and directing consumers towards the consumption of them. Additionally, governments may even force individuals to consume these goods if the deem them important enough. Examples of this include forcing individuals with dangerous diseases into the hospital or passing laws for compulsory education.