In a deposit-refund system, the deposit makes the polluter internalize the externality by absorbing the cost of any damage it might generate in advance.

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Quizplus · Accepted Answer

In a deposit-refund system, a deposit is paid in advance by the polluter and refunded when they properly dispose of the waste. This deposit serves as an incentive for the polluter to dispose of the waste properly and internalizes the cost of any potential damage caused by improper disposal, making the polluter accountable for their actions. Therefore, this statement is true.

In a Deposit-Refund System, the Deposit Makes the Polluter Internalize