Question

When a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to a. equalize private value and private cost. b. equalize private cost and external cost. c. externalize the actions of the buyers and sellers.

Answer 1

The question is not complete,find below the complete question:

When a policy succeeds in giving buyers and sellers in a market an incentive to take into account the external effects of their actions, the policy is said to

a. equalize private value and private cost.

b. equalize private cost and external cost.

c. externalize the actions of the buyers and sellers.

d. internalize the externality.

The correct option is D,internalize externality

Step-by-step explanation:

Externality refers to the negative or positive impact a product or service has on the external environment such as carbon emissions or the smoke coming from a vehicle plying a major highway.

The issue here is that negative impact such health challenges must be remedied one way or the other,hence it would nice to add the cost of such remedy to the original cost of the product or service causing the externality.

As a result,when buyers and sellers consider such impact ,they are internalizing the costs of externality,since the costs are being factored into planning process.

Answer 2

Answer: D. Internalizing the externality

Explanation: A policy that succeeds in giving buyers and sellers in a market an incentive to taken into account the external effects of their action in consumption and production is call " internalizing externalities ".

Internalizing the externality simply means shifting the burden, or costs, from a negative externality, such as environmental degradation, pollution or traffic congestion, from external to internal. This is done by government through taxes, tolls,property rights and government subsidies.