A government decision to impose a tax on the sale of plastic disposable water bottles is an example of:

Question

Quizplus · Accepted Answer

Imposing a tax on the sale of plastic disposable water bottles is an example of internalizing the externality. This is because plastic bottles have negative externalities, such as litter and environmental damage, that are not reflected in the market price. By imposing a tax, the government is making the producers and consumers of plastic bottles pay for these external costs, thus internalizing them.

A Government Decision to Impose a Tax on the Sale