Assignment task: There are 6 Wonka Candy factories clustered into an industrial zone upwind of a city. Each factory emits 1 unit of Happy Joy into the air for each pallet of Wonka Bars it produces. These Happy Joy emissions travel to the city and cause benefits (a positive externality) to two groups of city residents. The first are school children, who receive $4 worth of extra happiness for each unit of emissions. The second group are nursing home residents, who receive $20 worth of extra joy for each unit of emissions.
True or False: The Diamond model indicates that if the government can place a uniform subsidy on each factory per unit of emissions, the resulting allocation will not be fully efficient (it will only be "second best") because the externality benefits are heterogeneous. Explain briefly. (0.5 points)