Who gains surplus when consumers in a market are forced to internalize a negative externality?
A)Consumers
B)Producers
C)Others affected by the externality
D)All of these groups gain surplus when negative externalities are internalized.

Question

Quizplus · Accepted Answer

When consumers are forced to internalize a negative externality, the cost of the externality is included in the price that they pay for the good or service. This means that they will likely reduce their consumption of the good or service, which can lead to a reduction in the overall demand for the product. However, other parties who are affected by the negative externality (such as third parties who bear the costs of pollution or other negative externalities) may gain surplus as a result of the internalization of the negative externality. Producers may not necessarily gain surplus from this situation, as they may face increased costs due to regulations or other measures designed to internalize the negative externality.

Who Gains Surplus When Consumers in a Market Are Forced