Which of the Following Is an Example of an External

question 7

Multiple Choice

Which of the following is an example of an external benefit?

• A) More people start to install solar panels on their roofs, and as a result, electricity use goes down as does the pollution created by the generation of electricity.
• B) Firms are able to reduce their costs of production by using a more efficient technology.
• C) The city spends $500,000 to upgrade the local jail.
• D) A company opens a slaughterhouse at the end of your street.

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Definitions:

Cash Flow Hedge

A form of hedge accounting that aims to offset exposures to variability in cash flows, attributable to a particular risk associated with a recognized asset or liability.

Forward Contract

A financial contract between two parties to buy or sell an asset at a specified future time at a price agreed upon at the time of the contract.

Net Method

is an accounting method for recording purchases where the purchase is recorded at net of any trade discounts received.

Profit Test

A financial analysis conducted to determine the profitability or financial viability of a project, business, or product.