Externalities

question 28

Multiple Choice

Externalities:

• A) are not reflected in market prices, so they can be a source of economic inefficiency.
• B) do become reflected in market prices, so they can be a source of economic inefficiency.
• C) are not reflected in market prices, so they do not adversely affect economic efficiency.
• D) do become reflected in market prices, so they do not adversely affect economic efficiency.
• E) may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.

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Definitions:

Salvage Value

The estimated residual value of an asset at the end of its useful life, representing what it could be sold for or scrapped.

Technologically Obsolete

Refers to products, services, or technology that have become outdated or no longer maintain a competitive advantage due to advancements in technology.

Simple Rate Of Return

A method to evaluate an investment's efficiency by dividing the annual incremental net operating income by the initial investment cost.

Cash Operating Costs

Expenses a company incurs during its day-to-day operational activities that require cash payment.