Consider the case of a good with external benefits. If you plant trees in front of your house, the neighborhood is more attractive, and trees create shade, provide oxygen, and a home for birds and squirrels. Thus, the benefits to society are greater than the benefits to you. If the planting of trees is a private choice, you will plant too few trees relative to the socially optimal quantity, because the private value to you is less than the social value. a. Which of the following would not help to correct this problem?

1. Subsidize consumer purchases of trees to plant.
2. Tax homeowners who plant trees.
3. Subsidize nurseries that sell trees for planting.
4. Have the government provide trees to homeowners.
5. All of the above would help to correct the problem.

b. If the government pays for a program to increase the planting of trees, who will win and lose from the program?
c. The gains to the winners will be the losses to the losers.