Answer: Increase; Fall
Explanation:
Externalities are effects on third parties that are not party to the transaction between the parties that are in trade. A negative externality therefore is an adverse effect on people who were not party to a transaction for instance, a an oil company polluting the lake that a town depends on. The town would be suffering a negative externality.
When a good has a negative externality such as in the case of pollution, if the price is internalized in the good causing pollution ( Government imposes pollution taxes for instance), the price of the good will increase because costs of production have increased as well. The quantity will therefore fall because less of the good will be bought and less output will be produced as well in order to limit the externality.
