Internalising an Externality Means

question 30

Multiple Choice

Internalising an externality means

• A) the good becomes a public good.
• B) government regulations or taxes are sufficient to eliminate the externality completely.
• C) government imposes regulations that eliminate the externality completely.
• D) incentives are altered so that people take account of the external effects of their actions.

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Definitions:

Sales Price

The amount of money for which a product or service is sold to the customer.

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing to covering fixed costs and profit generation.

Fixed Costs

Expenses that do not change with the level of production or sales activities within a short time frame, such as rent, salaries, and insurance.

Variable Cost

Charges that adjust in accordance with the quantity of production or the scale of sales.