When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students, it is an example of
A) an attempt to internalize a positive externality.
B) an attempt to internalize a negative externality.
C) a Pigovian tax.
D) a command-and-control policy.

Question

Quizplus · Accepted Answer

The wealthy alumni are internalizing a positive externality by providing charitable contributions to reduce tuition payments of current students. This is because the reduction in tuition payments provides a positive benefit to the entire society, as it allows more students to have access to higher education at a lower cost. The alumni's contribution helps to internalize this benefit and allocate resources more efficiently.

When Wealthy Alumni Provide Charitable Contributions to Their Universities to Reduce