In a market economy, the ideal solution to the problem of externalities would be to:

Question

Quizplus · Accepted Answer

The ideal solution to the problem of externalities in a market economy is to internalize the externality by charging or taxing producers the precise marginal cost of the externality generated in production. This approach aligns the private cost of production with the social cost, leading to a more efficient allocation of resources.

In a Market Economy, the Ideal Solution to the Problem