William Engages in an Activity That Influences the Well-Being of a Bystander

question 358

Multiple Choice

William engages in an activity that influences the well-being of a bystander. In which of the following instances does an externality arise?

• A)The impact of William's activity on the bystander is adverse, and William compensates the bystander accordingly.
• B)The impact of William's activity on the bystander is adverse, but William fails to compensate the bystander.
• C)The impact of William's activity on the bystander is beneficial and the bystander compensates William accordingly.
• D)Externalities arise in all of the above cases.

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Definitions:

Commission Structure

Commission structure refers to the schedule or rate at which commissions are paid to sales employees or agents, based on their sales performance or revenue generated.

Per Share

A metric that indicates the value of a financial measure (like earnings or dividends) divided by the total number of shares outstanding.

CFA Institute Standards

Ethical and professional guidelines set forth by the CFA Institute to ensure integrity in financial analysis and investment professions.

SIPC

Securities Investor Protection Corporation, an organization that protects investors from the loss of cash and securities in case a brokerage firm goes bankrupt.