PPSCFPSCNTSPakistan govt jobs
Subject
Externality & Internalityeconomics-mcqs › externality-internality
Published
1 Jun 2019
Last updated
28 May 2026

Browse all Externality & Internality MCQs

Which public policy is most effective in addressing a negative externality by internalizing its social costs?

Multiple choice question for Externality & Internality. Select an option, then review the explanation below.

Choose the correct answer

Explanation

To correct a negative externality, the government can impose a tax on the product responsible, which helps incorporate the external costs into its market price. Other approaches like government control or outright bans are less practical, while subsidies would encourage production, worsening the externality.

Practice related questions from the same subject.

  1. 1.What is the primary function of tradable pollution permits?
  2. 2.The gas-guzzler tax imposed on new vehicles with poor fuel efficiency serves as an example of which economic concept?
  3. 3.Roberto and Thomas share a university dorm room. Roberto enjoys playing loud music, valuing it at €100, while Thomas prefers silence, valuing peace at €150. Assuming Roberto has the legal right to play loud music and there are no costs involved in negotiation, which of the following best describes an efficient outcome to this externality issue?
  4. 4.Which of the following is not classified as a transaction cost borne by parties when negotiating to address a pollution externality?
  5. 5.According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?

PakQuizHub — free MCQs and past papers for Pakistan government job tests. Content is for educational practice only.