A Negative Externality Occurs When the Purchase of a Product

question 69

Multiple Choice

A negative externality occurs when the purchase of a product

• A)causes the seller of the product to lose profits.
• B)increases market competition.
• C)causes the government to lose tax revenues.
• D)adversely affects the well-being of an individual outside of the market.
• E)causes a lower market price.

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Definitions:

Internal Rate

Often referring to the internal rate of return (IRR), which is the rate of growth a project is expected to generate, calculated as the rate of discount that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Net Present Value

A financial indicator that determines the variance between the current value of incoming and outgoing cash flows during a specific timeframe.

Initial Investment

The sum of funds utilized to initiate a project, investment, or business endeavor.

Cash Break-even

The point at which a business generates just enough revenue to cover its operating cash expenditures.