An Externality Can Be a Cost or Benefit Arising from the Production

question 3

Multiple Choice

An externality can be a cost or benefit arising from the production of a good that falls upon

• A) consumers but not producers.
• B) producers but not consumers.
• C) both the consumer and the producer.
• D) someone other than the consumer or producer.
• E) no one, so it goes unpaid.

---

Definitions:

Adjusted Basis

The value of an asset for tax purposes, calculated by modifying its original cost by factors such as depreciation or improvements.

Accumulated Depreciation

The total depreciation expense charged against an asset over its useful life.

Trade or Business Expenses

Trade or business expenses are the costs of carrying on a trade or business, and these expenses are usually deductible if the business operates to make a profit.

For AGI Deduction

For AGI deductions, also known as above-the-line deductions, reduce gross income to arrive at adjusted gross income and can include expenses such as certain business expenses, alimony payments, and contributions to retirement accounts.