When Positive Externalities Exist in a Market,if It Is Internalized

question 125

Multiple Choice

When positive externalities exist in a market,if it is internalized:

• A)those who interact in the market will lose surplus.
• B)those who interact in the market will gain surplus.
• C)those who do not interact in the market,but are affected by the externality,will gain surplus.
• D)None of these statements is necessarily true.

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Definitions:

Retained Earnings

The portion of net income that is not distributed as dividends to shareholders, but rather reinvested in the business or kept as reserve.

Equity Method

A method of accounting employed by a business to log its investment in another firm when it possesses considerable sway but lacks complete authority.

Noncontrolling Interest

A minority stake in a company that is not sufficient to confer control, often reflected in the equity section of the parent company's balance sheet.

Equipment

Tangible property owned by a company that is used in its operations, such as machinery, computers, and office furniture.