When individuals take external costs and benefits into account:
A)there are no external costs.
B)they internalize the externality.
C)the government should intervene in the market.
D)the market will not reach an efficient solution.

Question

Quizplus · Accepted Answer

When individuals take external costs and benefits into account, they are internalizing the externality. This means that they are including the external costs and benefits in their decision-making process and bearing the cost or reaping the benefit of their actions. This internalization leads to a more efficient allocation of resources as the market price reflects the true cost of production and consumption.

When Individuals Take External Costs and Benefits into Account