When External Benefits Are Present

question 16

Multiple Choice

When external benefits are present

• A) competitive markets are efficient.
• B) competitive markets are inefficient.
• C) a tax is required to eliminate the inefficiency.
• D) property rights have already been established.

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Definitions:

Par Value

The face value of a bond or stock as specified by the issuing company, which has little relation to its market value.

Market Value

The price at which an asset would trade in a competitive auction setting.

Common Stock

A type of equity security that represents ownership in a corporation, entitling holders to vote on corporate matters and receive dividends.

Retained Earnings

The portion of a business's profits not distributed to shareholders but reinvested in the business or held for future use.