What does the phrase 'internalising an external cost' mean?
A)Limiting the extent to which domestic firms can outsource production
B)Prohibiting economic activities that create externalities
C)Forcing producers to factor into their production costs the cost of the externalities created in the production of their output
D)Finding a way to address cross-border pollution

Question

Quizplus · Accepted Answer

Internalising an external cost refers to the practice of forcing producers to factor in the cost of externalities created during the production process. Externalities are costs or benefits that are not reflected in the market price of a good, and are instead imposed on third parties. By internalising these costs, producers are held responsible for the full cost of their production, which helps to incentivise more environmentally-friendly practices and reduces the negative externalities associated with production.

What Does the Phrase 'Internalising an External Cost' Mean