When Does a Negative Externality Exist

question 66

Multiple Choice

When does a negative externality exist?

• A)When there are quantity controls in a market
• B)When there are price controls in a market
• C)When the marginal social cost of producing a good or service exceeds the private cost
• D)When the marginal private cost of producing a good or service exceeds the social cost

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Definitions:

Growth Opportunities

Potential scenarios or plans a business can embark on to increase profits, expand its operations, or enter new markets.

Abnormal Earnings

Income that deviates significantly from what is typical or expected, usually referring to profits significantly higher or lower than those typical for the industry or the company's history.

Valuation Approach

The methodologies and procedures used to determine the value of an asset, a company, or a financial instrument.

Expected Earnings

The anticipated profit or income generated by an investment or a business activity in a future period.