When an Activity Produces a Positive Externality, Too Much of It

question 25

Multiple Choice

When an activity produces a positive externality, too much of it is produced relative to the efficient level.

• A)True
• B)False
• C)Uncertain

---

Definitions:

Equity Method

A financial recording method for logging investments in subsidiary entities where the investor has considerable sway but lacks complete dominance.

Goodwill

An intangible asset that arises when a company acquires another business for a price higher than the fair value of its identifiable net assets.

Equity Method

An accounting technique used when an investor holds significant influence but not full control over an investee, allowing the investor to record a proportionate share of the investee's profits or losses.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and equity of a parent company and its subsidiaries as one entity.