Steve and Don Are Neighbours Who Work at the Same

question 107

Multiple Choice

Steve and Don are neighbours who work at the same firm and hold the same title.Steve finds that when Don's consumption rises,he feels worse off.Don feels the same way towards Steve's consumption.
-Refer to the information above.For both Steve and Don,

• A) their own consumption is a positional externality.
• B) consumption in general is a positional externality.
• C) consumption in general has external benefits.
• D) each other's consumption is a positional externality.
• E) each other's consumption is a common property issue.

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Definitions:

WACC

Weighted Average Cost of Capital; a method for assessing a firm's capital costs by applying proportional weights to each kind of capital.

Credit Rating

An evaluation of the creditworthiness of an individual or corporation, often expressed as a grade or score, that reflects the likelihood of the entity defaulting on its debts.

Cost of Debt

The effective rate that a company pays on its total debt.

Divisional Cost

The total expenses associated with operating a specific department or segment within a company.