When a paper mill pollutes the air as a result of its production process, the firm must pay a fine. This is an example of:
A) environment standards.
B) communication.
C) internalizing an externality.
D) environmental communication.

Question

Quizplus · Accepted Answer

This is an example of internalizing an externality, where the firm is made to bear the cost of the negative effects (pollution) its operations have on the environment, typically through fines or taxes.

When a Paper Mill Pollutes the Air as a Result