Economics · Environmental Economics
Which of the following is incorrect about the problem of externalities?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The process of internalization of a negative externality strictly requires that both parties must experience a net welfare gain.✓
- 2They may be marginal or infra-marginal.
- 3They refer to an interdependence between two parties that operates outside the price mechanism.
- 4They may be reciprocal or unidirectional.
Correct answer
The process of internalization of a negative externality strictly requires that both parties must experience a net welfare gain.
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