A Negative Externality Is Created If

question 40

Multiple Choice

A negative externality is created if:

• A) an action harms someone not involved in the market transaction.
• B) an action benefits someone not involved in the market transaction.
• C) neither helps nor hurts someone not involved in the market transaction.
• D) an action harms or benefits someone not involved in the market transaction.

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Definitions:

IRR

The Internal Rate of Return (IRR) serves as a financial measure designed to calculate the potential profitability of investments.

Capital Cost Allowance

The annual depreciation expense that a company can claim as a deduction for tax purposes on its capital assets.

Cannibalization

The reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer.

Pre-Tax Cash Flow

The amount of cash that a company generates before accounting for taxes, used in evaluating its financial performance.