A Negative Externality Arises When a Person Engages in an Activity

question 294

Multiple Choice

A negative externality arises when a person engages in an activity that has

• A)an adverse effect on a bystander who is not compensated by the person who causes the effect.
• B)an adverse effect on a bystander who is compensated by the person who causes the effect.
• C)a beneficial effect on a bystander who pays the person who causes the effect.
• D)a beneficial effect on a bystander who does not pay the person who causes the effect.

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Definitions:

Net Purchases

The total amount of purchases made by a company after subtracting returns, allowances, and discounts.

Merchandise Available

The total goods available for sale during a certain period, including both beginning inventory and purchases made.

Periodic Inventory

A periodic inventory system updates inventory balances and costs of goods sold at the end of an accounting period, rather than after each sale or purchase.

Accounting Period

A specific time frame used for financial reporting, typically encompassing a quarter or a year, during which a company reports its financial performance.