One way of addressing the associated market failure that generates both private costs and external costs is for this activity to be
A) left alone.
B) taxed.
C) subsidized.
D) banned.

Question

Quizplus · Accepted Answer

Taxing the activity that generates both private costs and external costs is a way of addressing market failure. This creates an additional cost that must be paid by the producer, which may decrease the quantity of the good or service being produced, ultimately reducing the negative externalities associated with it. Banning the activity may be too extreme and may not be the most effective solution. Subsidizing the activity may only exacerbate the market failure by increasing the production of the good or service, leading to more negative externalities. Therefore, the best choice is to tax the activity.

One Way of Addressing the Associated Market Failure That Generates