In a "Second-Best" World

question 55

Multiple Choice

In a "second-best" world:

• A)tariffs are economically optimal.
• B)private actions are dictated by government agencies.
• C)social marginal cost of a transaction equals social marginal benefit.
• D)private actions do not lead to the best possible outcomes for society.

---

Definitions:

Bargain Purchase Option

An option in a lease agreement that allows the lessee to purchase the leased asset at a price significantly below its fair market value.

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes because it meets certain criteria, such as transfer of ownership by the end of the lease term.

Operating Lease

A lease agreement for property or equipment that is considered a rental and is not recorded as an asset on the company's balance sheet.

GAAP

Generally Accepted Accounting Principles, a collection of commonly followed accounting rules and standards for financial reporting in the United States.