When dealing with negative externalities, what is meant by the term "internalizing an externality"?
What will be an ideal response?
Internalizing an externality refers to transferring the external costs to the producer that generates the negative externality.
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Several firms want to be the only horse carriage service in a small tourist town and must pay the city for a license to operate as a monopoly. Competition among the potential firms will result in
A) bidding up the price of the license so that the winning firm makes $0 economic profit. B) the winning firm making an economic profit because it will be a price maker. C) the winning firm making an economic profit because it will have no competition. D) the winning firm making an economic profit because rent seeking cannot occur. E) a $0 economic profit because monopolies are illegal.
The fact that many people drive faster than the posted speed limit suggests that
A) not all price floors are enforceable. B) not all price and quantity regulations are enforceable. C) individual drivers act irrationally. D) government regulation is utterly useless.