Aaron Has a Tree in Which Bats Like to Perch

question 17

Multiple Choice

Aaron has a tree in which bats like to perch.He is worried his children will catch a disease from the droppings if they play in the garden, but knows the droppings are also good fertiliser for the garden.These effects of the bats perching in the trees are examples of:

• A)why it is complicated to devise policies for externalities
• B)negative externalities
• C)both positive and negative externalities
• D)why governments should leave the market to find solutions to externalities

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Definitions:

Deferred Tax Asset

A tax amount that is paid or carried forward, representing future tax savings due to overpayment or advance payment of taxes, or due to allowable temporary differences.

Valuation Allowance

An allowance made against deferred tax assets that are not expected to be realized in full or in part.

Future Benefits

The expected gains or returns from an investment or policy, often used in evaluating its worth.

Accrued Product Warranty

A liability representing the estimated costs of fulfilling product warranty obligations.