Which Example Illustrates the Concept of a Negative Externality

question 173

Multiple Choice

Which example illustrates the concept of a negative externality?

• A) a college professor loses a vigorous game of racquetball using the racquet he recently purchased
• B) a flood wipes out a farmer’s entire corn crop
• C) a college student plays his new sound system in the residence at 2:00 a.m
• D) a janitor eats fast-food during his lunch break

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Definitions:

Potential Common Shares

Financial instruments or arrangements that could potentially be converted into common stock, impacting the earnings per share calculation.

Earnings Per Share Footnotes

Additional notes in financial reports that provide details on the calculation and factors affecting the earnings per share metric.

Accumulated Other Comprehensive Income

A component of shareholders' equity, representing income that is not part of net income, such as unrealized gains or losses on certain types of investments.

Stockholders' Equity

The residual interest in the assets of an entity that remains after deducting its liabilities, representing owners' claims against the company's assets.