Why Can't Private Individuals Always Internalize an Externality Without the Help

question 20

Multiple Choice

Why can't private individuals always internalize an externality without the help of government?

• A)Legal restrictions prevent side payments between individuals.
• B)Transactions costs may be too high.
• C)Side payments between individuals are inefficient.
• D)Side payments between individuals violate equity standards.

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Definitions:

Induction

A discipline technique in which a parent uses reasoning and explains how the child’s actions are likely to affect others.

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The ability to understand and share the feelings of others from diverse cultures and backgrounds, fostering a sense of interconnectedness and compassion on a worldwide scale.

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The ability or act of understanding, sharing, and responding to the emotional state of another individual.