ECONOMICS
MARKET FAILURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Trade permits between firms until the externailty decreases to zero through an shift upwards of the MSC curve to intersect at the new optimal level of production
|
|
|
The costs that were previously imposed on society are made internal because they are now paid for by the two parties to the transaction; the producers and the consumers
|
|
|
The costs that were previously imposed on society are made internal because they are now paid for by the producers entirely
|
|
|
The costs that were previously imposed on society are made internal because they are now paid for by the consumers entirely
|
Detailed explanation-1: -Internalization of externalities refers to all measures (public or private) that guarantee that unpaid benefits or costs are taken into account in the composition of goods and services prices (Ding et al., 2014).
Detailed explanation-2: -Externalities can be internalized through market mechanism, government regulation, or self-governing institutions or a mix of these institutions. We recommend the institutional route which minimizes total cost (sum of technology, management, and transaction costs) to the firm.
Detailed explanation-3: -What does the phrase “internalizing an external cost” mean? Forcing producers to factor into their production costs the cost of the externalities created in the production of their output.
Detailed explanation-4: -In economics, externalities are a cost or benefit that is imposed onto a third party that is not incorporated into the final cost. For example, a factory that pollutes the environment creates a cost to society, but those costs are not priced into the final good it produces.