What Does the Phrase "Internalizing an External Cost" Mean

question 253

Multiple Choice

What does the phrase "internalizing an external cost" mean?

• A)limiting the extent to which domestic firms can outsource production
• B)prohibiting economic activities that create externalities
• C)forcing producers to factor into their production costs the cost of the externalities created in the production of their output
• D)finding a way to address cross-border pollution

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Definitions:

Income Effect

The change in consumption that results when a price change moves the consumer to a higher or lower indifference curve

Aggregate Demand

Aggregate demand represents the total demand for goods and services within an economy at a given overall price level and in a given time period.

Future Generations

Individuals or populations that will exist in the future, beyond the current members of society, whose interests are considered in long-term policy making.

Budget Deficit

A shortfall of tax revenue from government spending