Which of the following is an example of internalizing an externality?
A) a paper mill that spends money removing the pollution it generated
B) a neighbor leaving lots of trash in his front yard
C) a student receives $15 for each bright question asked during lecture
D) Both A and C.

Question

Quizplus · Accepted Answer

Internalizing an externality involves taking into account the external costs or benefits of an economic activity and making them part of the decision-making process. A) represents internalization by the paper mill taking responsibility for its pollution, and C) shows a positive externality being internalized through a reward system for good questions, encouraging more of such behavior.

Which of the Following Is an Example of Internalizing an Externality