Possible solutions to the misallocations created by externalities include:
A)private bargaining but not internalization.
B)internalization.
C)central planning.
D)internalization but not public regulation.

Question

Quizplus · Accepted Answer

Internalization is the most effective solution to misallocations created by externalities. Internalizing the cost of externalities means making those who create externalities bear the costs themselves. This can be achieved through taxes or subsidies, or through market-based mechanisms such as cap and trade programs. Private bargaining may not always be successful in achieving the socially optimal outcome, and central planning is not practical in most cases. Public regulation can also be effective, but internalization is a more direct and efficient solution.

Possible Solutions to the Misallocations Created by Externalities Include