Which of the Following Illustrates the Concept of External Cost

question 1

Multiple Choice

Which of the following illustrates the concept of external cost?

• A) Margaret purchases all her food and clothing in the big city outside her residence.
• B) A small business owner frequently buys raw materials by using her bank's line of credit.
• C) Raymond cannot open his windows at times because he lives downwind from a mushroom farm.
• D) Felicia, an economics major, asks the most insightful questions in class.

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Assets and Liabilities

Components of a company's financial statement, where assets represent resources owned and liabilities represent obligations owed.

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period of time, leading to the net profit or loss.

Breakeven Analysis Account

A financial calculation that determines the point at which the cost of producing a product equals the revenue made from selling the product.