If the government wishes to encourage firms to internalize externalities, they should tax activities resulting in ________ externalities and subsidize activities resulting in ________ externalities.

A) negative; positive
B) positive; negative
C) no; positive
D) negative; no

Externalities

Monetary consequences that reach beyond the primary parties, impacting others positively or negatively.

Tax

An essential fiscal demand or variant form of duty exacted from a taxpayer by a governmental institution, intended to sustain government expenditure and miscellaneous public financial requirements.