Why Are Negative Externalities Difficult to Internalize in Practice

question 10

Multiple Choice

Why are negative externalities difficult to internalize in practice?

• A) because the cost of cleaning up the effects of pollution is overstated
• B) because the marginal cost of socially owned resources is zero
• C) because no markets exist to measure the cost of the externality
• D) because the deadweight loss is subjective in nature

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Definitions:

Federal Income Tax

A charge imposed by the IRS on the yearly income of persons, corporations, trusts, and various legal bodies.

Gross Earnings

The total amount of money earned by an individual or company before deductions such as taxes and retirement contributions.

Withholding Allowance

A claim made by an employee on the W-4 form that reduces the amount of tax withheld from their paycheck.

Federal Income Tax

A tax levied by the United States government on the annual earnings of individuals, corporations, trusts, and other legal entities.