What Is Meant by the Term "Internalizing an Externality"? How

question 66

Essay

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

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Definitions:

School Learning

A process that involves acquiring knowledge, skills, values, and attitudes within an educational institution.

Social-learning Approach

The social-learning approach is a theory in psychology that suggests individuals learn behaviors through observing others, imitating them, and seeing the consequences of these behaviors.

Imitation

The action of using someone or something as a model and attempting to replicate their behavior, actions, or features.

Vicarious Punishment

Learning that occurs when the likelihood of a behavior decreases after observing the negative consequences applied to another individual's behavior.