Question

Altering incentives so that people take account of the external effects of their actionsa. is called internalizing the externality.b. can be done by imposing a corrective tax.c. is the role of government in markets with externalities.d. All of the above are correct.

Answer 1

Altering incentives so that people take account of the external effects of their action is d. All of the above are correct.

Step-by-step explanation:

Internalizing the externality means shifting the burden, or costs, from a negative externality, such as pollution or traffic congestion, from outside to inside (external to internal). This can be done through taxes, property rights, tolls, and government subsidies.