Use the Following to Answer Question(s): Correcting for Market Failure

question 121

Multiple Choice

Use the following to answer question(s) : Correcting for Market Failure: External Cost

-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.If the government intervenes to correct for the external cost, there will be a(n) ________ in _______ of _______ .

• A) decrease; benefit; WTVR
• B) increase; cost; WTUR
• C) decrease; net benefit; TUV
• D) increase; deadweight loss; TUV

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses, including taxes, from its total revenues.

Indirect Method

Indirect Method is a way of preparing the cash flow statement where net income is adjusted for non-cash transactions, changes in working capital, and other items to calculate cash flow from operating activities.

Operating Activities

Operating Activities involve the primary day-to-day actions related to producing and delivering a company's products or services, influencing cash flow and operating income.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.