What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?
What will be an ideal response?
Internalizing an externality refers to transferring the external benefit or cost to the producer or consumer that generates the externality. A Pigovian tax transfers a negative externality in production back to the producer, which reduces the supply of the product and results in an efficient level of output. A Pigovian subsidy transfers a positive externality in consumption back to the consumer, which increases the demand for the product and results in an efficient level of output.
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An increase in regulation will shift the aggregate:
a. demand curve leftward. b. supply curve rightward. c. supply curve leftward. d. demand curve rightward.
The U.S. federal government is unlikely to default on its bond payments because:
A. if necessary, it can print the money needed to make payments on time. B. its bond payments are insured. C. the U.S. federal budget usually runs a surplus, providing ample funds for repaying debt. D. of all of these.