If externalities are fully internalized,an outcome is efficient,even without government intervention.

Question

Quizplus · Accepted Answer

When externalities are fully internalized, the cost of the externality is borne by the parties involved in the market transaction. This means that the market outcome will already be efficient as the parties will be taking into account all the costs and benefits of the transaction. Therefore, government intervention may not be necessary.

If Externalities Are Fully Internalized,an Outcome Is Efficient,even Without Government