When a Person Throws a Cigarette Out of a Car

question 72

Multiple Choice

When a person throws a cigarette out of a car window and starts a brush fire, this is

• A) an example of an external benefit.
• B) an example of an external cost.
• C) an example of a public good.
• D) an example of market power.

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Definitions:

Spot Rate

The current exchange rate at which a currency can be bought or sold for immediate delivery.

Settlement Date

The date on which a trade is finalized, and the buyer must make payment and the seller deliver the asset.

Fair Value Hedge

A type of hedge that aims to offset changes in the fair value of an asset or liability or an unrecognized firm commitment.

Forward Contract

An agreement to buy or sell an asset at a future date at a price agreed upon today, often used to hedge against price movements.