Which of the Following Is True of a Negative Externality

question 98

Multiple Choice

Which of the following is true of a negative externality?

• A) Some costs are borne by a third party.
• B) The government can use subsidies to encourage firms to internalize the externality.
• C) The government must take over the production of this good so that the externality can be internalized.
• D) Some benefits accrue to a third party.
• E) Its existence always requires corrective measures by the government.

Recognize how the present value concept affects the quantity of loanable funds demanded.

Identify the principles of moral hazard and adverse selection in insurance markets.

Understand diversification and how it reduces risk in investment portfolios.

Learn the effects of interest rates on the present value of future payments.

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Definitions:

Substitutes

Goods or services that can be used in place of each other, where the increase in the price of one leads to an increased demand for the other.

Coffee

A beverage made by grinding and brewing the seeds of the coffee plant, commonly consumed for its stimulating effects.

Tea

An aromatic beverage commonly prepared by pouring hot or boiling water over cured or fresh leaves of the Camellia sinensis plant.

Wage Rate

The amount of compensation or payment received by an employee per unit of time or piece of work completed.