What Does the Phrase 'Internalising an External Cost' Mean

question 12

Multiple Choice

What does the phrase 'internalising 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:

Customers Served

The number of consumers who purchase or are provided with a product or service by a business within a specific period.

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the overall returns will eventually decrease after a certain point.

Marginal Product

The additional output that results from using one more unit of a particular input, while holding other inputs constant.

Average Product

The output obtained by dividing the total product by the number of units of the variable input used in production, ideally reflecting productivity per input unit.