Suppose That in Most Car Collisions Between Cars of Unequal

question 6

Multiple Choice

Suppose that in most car collisions between cars of unequal size, the smaller car sustains the most damage and its occupants suffer the most injury. In answering the following question, assume that, on average, smaller cars generate less air pollution than larger cars and that every person in the economy drives at least one car. Relative to driving an average car, driving a larger-than-average car generates:

• A)an external cost.
• B)an external benefit.
• C)neither an external benefit nor an external cost.
• D)a prisoner's dilemma.

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Definitions:

Fair Value

The estimated market value of an asset or liability, based on current market conditions rather than historical cost.

Trading Securities

Financial assets such as stocks or bonds, bought and held primarily for the purpose of selling them in the near term to realize short-term gains.

Fair Value

An estimate of the market value of an asset or liability, reflecting the amount for which it could be exchanged or settled between knowledgeable, willing parties in an arm's length transaction.

Retained Earnings

Profits that a company has reinvested into the business rather than distributing to shareholders as dividends.