Why can't private individuals always internalize an externality without the help of government?
A)Legal restrictions prevent side payments between individuals.
B)Transactions costs may be too high.
C)Side payments between individuals are inefficient.
D)Side payments between individuals violate equity standards.

Question

Quizplus · Accepted Answer

Transactions costs may be too high for private individuals to internalize an externality without the help of government. This means that it may not be cost-effective or feasible for individuals to negotiate and agree upon side payments or other solutions to address the externalities. Government intervention can help overcome these transaction costs and facilitate collective action to address externalities.

Why Can't Private Individuals Always Internalize an Externality Without the Help