An externality is said to be internalized: when individuals learn to adapt to negative externalities through introspection or internal acceptance of what are viewed as unchangeable facts of life. when the Coase theorem is irrelevant or cannot be applied. when individuals successfully petition the government to ban or restrict activities that generate negative externalities. when individuals take external costs and benefits into account in their decision making.

when individuals take external costs and benefits into account in their decision making.

Explanation:

In economics, an externality is defined as the benefit or cost that has an impact on someone or a third party who had no intention of incurring the cost or the benefit. Externalities are either positive or negative. However, internalizing an externality simply implies moving away the costs or burden from a negative externality from outside to inside. Taking external costs and benefits and putting them into account in a decision making is simply an example of internalizing an externality.

when individuals take external costs and benefits into account in their decision making.