Which of the Following Would Be Classified as an External

question 67

Multiple Choice

Which of the following would be classified as an external cost (negative externality) ?

• A) You are not able to study at night because there is so much noise coming from the room next to yours.
• B) A private firm will not provide national defence since it is impossible to confine the benefits to only those individuals who have paid for it.
• C) When you purchase a product, the cost is higher than you originally anticipated.
• D) As more firms began hiring computer programmers, the salaries of computer programmers increased and therefore the firm's cost of production increased.

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Definitions:

Diluted Earnings

Represents the earnings per share (EPS) if all convertible securities were converted into common stock.

Dilutive

Referring to a financial action or arrangement, such as the issuance of new shares, that decreases an existing shareholder's percentage of ownership.

Antidilutive

Refers to financial transactions or securities that, if exercised or converted into common stock, would increase earnings per share.

Treasury Stock Method

An accounting method used to calculate the number of shares outstanding when considering stock options and warrants, assuming these are exercised and the treasury stock is sold.