A negative externality can be internalized by a. persuasion. b. the imposition of a tax. c....

A negative externality can be internalized by

a. persuasion.

b. the imposition of a tax.

c. the assignment of property rights.

d. a voluntary agreement.

e. all of the above

Solutions

Expert Solution

A negative externality is a situation when due to the transaction between the first two parties causes the effect on the third party in a negative way

Let's clear it with an example -suppose a factory is running in the middle of a village

The factory is earning a lot of profit and making the consumer satisfied by its product But Here's the third parties that are villagers are suffering from the air and water pollution that is caused by the factory

so it is a case of a negative externality

A negative externality can be best possibly resolved by the imposition of a tax so that Limited number of waste can be generated or causes less harm to the third party

Persuasion is an opposite situation according to the given situation so it will be ruled out

Voluntary agreement it is an own free will agreement by own choice which will not help in resolving the externality, so it will also be ruled out

So the answer is option B

Rahul Sunny answered 8 months ago

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