With Defined Property Rights, an Externality

question 294

Multiple Choice

With defined property rights, an externality

• A) can only be corrected with government intervention.
• B) will not lead to a misallocation of resources.
• C) may be internalized with voluntary contracting, under certain circumstances.
• D) must lead to society producing inside its production possibilities frontier.

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Definitions:

Parent and Subsidiary

A parent and subsidiary relationship exists when one company, the parent, owns more than half of another company, the subsidiary, granting control and often integrating operations or management.

Consolidated Financial Statements

Consolidated financial statements aggregate the financial information of a parent company and its subsidiaries, presenting it as if the group were a single entity.

Controlling Influence

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Interest Revenue

Income earned from lending money or investing in interest-bearing financial instruments.