Why are negative externalities difficult to internalize in practice?
A) because the cost of cleaning up the effects of pollution is overstated
B) because the marginal cost of socially owned resources is zero
C) because no markets exist to measure the cost of the externality
D) because the deadweight loss is subjective in nature

Question

Quizplus · Accepted Answer

Negative externalities are difficult to internalize in practice because no markets exist to measure the cost of the externality. This means that the parties responsible for the negative externality do not pay for the full cost of their actions, leading to an inefficient allocation of resources. The lack of a market also makes it difficult to determine the optimal level of the externality, which further complicates the internalization process.

Why Are Negative Externalities Difficult to Internalize in Practice