If a Good That Generates Negative Externalities Were Priced to Take

question 60

Multiple Choice

If a good that generates negative externalities were priced to take these negative externalities into account, then its

• A) price would decrease and its quantity would increase.
• B) quantity would increase, but its price would remain constant.
• C) price would increase and its quantity would decrease.
• D) price would increase, but its quantity would remain constant.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the investee's profits or losses.

Journal Entries

The basic way to record financial transactions in double-entry bookkeeping, involving debits and credits in accounting records.

Dividends

Disbursements issued by a company to its shareholders, typically originating from the firm's earnings.

Fair Value Through Profit or Loss

An accounting approach where financial assets are recorded at their fair value, with changes affecting the profit or loss statement directly.