Will proposed solution make builder internalize externality

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Question: In most areas, developers are required to submit environmental impact studies before work can begin on new construction projects. Suppose that a commercial developer wants to build a new shopping center on an environmentally protected piece of property that is home to a rare three-eyed toad. The shopping complex, if approved by the local planning commission, will cover ten acres. The planning commission wants the construction to go forward since that means additional jobs for the local community, but it also wants to be environmentally responsible. One member of the commission suggests that the developer relocate the toads. She describes the relocation process as follows: "The developer builds the shopping mall and agrees to create ten acres of artificial toad habitat elsewhere." Will this proposed solution make the builder internalize the externality? Explain.

Reference no: EM131480992

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