Government can internalize externalities by

Question

Quizplus · Accepted Answer

Taxing goods with negative externalities (such as pollution) makes them more expensive, reducing the demand for them and therefore reducing their production and consumption. Subsidizing goods with positive externalities (such as education) makes them less expensive, increasing the demand for them and therefore increasing their production and consumption. This helps to internalize the externalities by making producers and consumers pay for the costs and benefits they impose on others.

Government Can Internalize Externalities by