Internalizing an externality means
A) the good becomes a public good.
B) government regulations or taxes are sufficient to eliminate the externality completely.
C) government imposes regulations that eliminate the externality completely.
D) incentives are altered so that people take account of the external effects of their actions.

Question

Quizplus · Accepted Answer

Internalizing an externality means altering incentives so that people take account of the external effects of their actions. This can be done through government regulations or taxes, but it doesn't necessarily eliminate the externality completely. The good doesn't become a public good and government regulations don't always eliminate the externality completely.

Internalizing an Externality Means