Respuesta :
When the government intervenes in markets with external costs, it does so in order to protect the interests of bystanders. An externality is either an external cost or external benefit that spills over to bystanders.
Government can play a role in reducing negative externalities by taxing goods when their production generates spillover costs. This taxation effectively increases the cost of producing such goods. The higher cost, then, better reflects the true cost of production because it includes the spillover costs of, say, pollution.
So, such taxation attempts to make the producer pay for the full cost of production. The use of such a tax is called internalizing the externality. When the government intervenes in markets with external costs, it does so in order to: protect the interests of bystanders. An externality is either an external cost or external benefit that spills over to bystanders.
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