Once the social cost of emissions is included in the price, the firms will reduce their production and will charge a higher price.

Question

Quizplus · Accepted Answer

This statement is in line with the concept of "internalizing externalities," where the social cost of emissions is reflected in the price of the product. When firms have to pay for the negative impact of their activities, they would likely reduce their production to minimize the costs and increase the price of their product to maintain their profit margin. This would ultimately lead to a reduction in emissions and disincentivize environmentally damaging activities.

Once the Social Cost of Emissions Is Included in the Price