Solving an externality involves:

Question

Quizplus · Accepted Answer

Solving an externality involves considering the social costs imposed by a particular economic activity. This is because an externality occurs when the private cost of the activity is not equal to the social cost. By including the social costs, policymakers can create policies that incentivize economic actors to consider the full costs of their actions and account for the negative externalities they may create. Excluding social costs would perpetuate the externality and result in inefficient market outcomes. Therefore, including social costs is the best choice for solving an externality.

Solving an Externality Involves