The government has identified a situation where the production of a good is creating a negative externality.The government should enact legislation to require firms to internalize the externality

Question

Quizplus · Accepted Answer

Requiring firms to internalize the externality may have costs such as higher production costs or reduced output. Thus, it is important to consider whether the benefits of internalizing the externality outweigh these costs. Therefore, enacting legislation to require firms to internalize the externality should only be done if the benefits outweigh the costs.

The Government Has Identified a Situation Where the Production of a Good