-When the government makes the people creating an externality, pay for it, the externality is said to be internalized.

Question

Quizplus · Accepted Answer

When the government imposes a cost on those creating an externality, it forces them to take into account the external costs they are imposing on others, effectively internalizing the externality. This means the external costs are now included in the decision-making process of the entity causing them.

-When the Government Makes the People Creating an Externality, Pay