An Externality Is _____

question 164

Multiple Choice

An externality is _____

• A)a cost of a transaction that is borne by the government.
• B)a benefit of a transaction that is enjoyed by the firms.
• C)a cost or benefit that arises when market price changes.
• D)any cost or benefit of a transaction that is not accounted for in the market price.
• E)the revenue generated by a firm.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting in a particular jurisdiction, notably the United States.

Cookie Jar Reserves

Accounting practices where companies set aside reserves during good financial periods to smooth out earnings in future, less favorable periods.

Estimated Obligations

The predicted liabilities or commitments a company expects to incur in the future, often found in financial planning and budgetary processes.

Overreserving

Overreserving refers to setting aside more funds or reserves than necessary for anticipated obligations or liabilities, which can affect a company's financial statements by overstating expenses.