Exhibit 30-5 ​

question 170

Multiple Choice

Exhibit 30-5
​

-Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal

• A)P₄ - P₂.
• B)P₃ - P₁.
• C)P₂ - P₁.
• D)P₃ - P₂.
• E)a and b

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, and should not influence future business decisions.

Initial Period Cash

The amount of cash available at the beginning of a financial period or the start of a project.

Project Termination

The process of concluding or finalizing a project after its objectives have been achieved or it has been determined that objectives cannot be achieved.

Incremental Cash Flows

The additional cash flow a business receives from taking on a new project or investment.