Which of the following is true? If consumption of a good gives rise to a positive externality, it can be internalized by taxing the producers of the good. If production of a good gives rise to a positive externality, it can be internalized by taxing the consumers of the good. If production of a good gives rise to a negative externality, it can be internalized by taxing the producers of the good. If consumption of a good gives rise to a negative externality, it can be internalized by subsidizing the purchase of the good.

If consumption of a good gives rise to a negative externality, it can be internalized by subsidizing the purchase of the good.

Explanation:

The effect of a market exchange on a third party who is outside or “external” to the exchange is called an externality or spill over.

Negative externality are negative spill over effects of a transaction, a situation where a third party, outside the transaction, suffers from a market transaction by others .

Internalizing the externality means shifting the burden, or costs, from a negative externality, such as pollution or traffic congestion, from outside to inside (external to internal). This can be done through taxes, property rights, tolls, and government subsidies.

A negative externality exists is the cost of production exceeds private costs

Hence, such negative externality can be internalized through subsidy by the government

if you do not file your taxes you will not have a job, and you credit rate will go down.