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Emilee Spangler
on Nov 17, 2024

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A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.

Congestion Toll

A fee charged to drivers who use certain roads during peak periods, intended to reduce traffic congestion by discouraging the use of those routes.

Internalizing

The process of absorbing or taking in information, values, or costs, often used when discussing the incorporation of external costs into market prices.

Externality

An economic effect of a transaction that affects third parties who did not choose to be involved in the transaction.

  • Gain understanding of the techniques used in incorporating externalities to adjust market outcomes.
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Savanna DuranNov 19, 2024
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