A Society Can Sometimes Alleviate Problems Caused by Externalities by

question 176

Multiple Choice

A society can sometimes alleviate problems caused by externalities by

• A)having the government produce the good or service.
• B)using tax revenues to subsidize the firm causing the negative externality.
• C)using government expenditures to penalize the firm causing the positive externality.
• D)doing nothing.
• E)prohibiting the production of externalities.

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Definitions:

Transfer Price

The price at which goods or services are transferred between departments or subsidiaries within the same company, used for accounting and tax purposes.

Operating Income

Earnings before interest and taxes (EBIT), calculated as gross income minus operating expenses.

Variable Cost

A variable cost varies directly with the level of production or sales volume, such as materials and labor costs.

Operating Income

Earnings before interest and taxes (EBIT), a measure of a company's profitability from regular business operations.