Once a firm is made to internalize a negative externality, the price will
A) increase and output will decrease.
B) increase and output will increase.
C) decrease and output will decrease.
D) decrease and output will increase.

Question

Quizplus · Accepted Answer

When a firm is made to internalize a negative externality, it means the firm now bears the external costs that previously were not accounted for in its production costs. This leads to an increase in the firm's costs, which typically results in higher prices for consumers and a reduction in the quantity of goods produced, as the firm adjusts to the new cost structure.

Once a Firm Is Made to Internalize a Negative Externality