If People Took External Costs Like Pollution into Consideration

question 36

Multiple Choice

If people took external costs like pollution into consideration:

• A) they would consume less of the goods causing these externalities.
• B) they would act in a way that is optimal from a societal perspective
• C) the markets for these goods creating such externalities would generate greater surplus.
• D) All of these statements are true.

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Definitions:

Cash Basis

A financial recording strategy that logs earnings and expenditures upon the actual receipt or payment of money, as opposed to when they are earned or incurred.

Direct Method

A way of preparing a cash flow statement where cash receipts and payments are reported directly.

Operating Activities

Transactions and other events related to the core business operations, affecting the operational cash flows of a company.

Selling and Administrative Expense

A category of expenses including overheads related to the general operation of a company, such as executive salaries, marketing, office supplies, and utilities.