Which of the Following Is True of Externalities

question 38

Multiple Choice

Which of the following is true of externalities?

• A)Positive externalities arise when an economic activity imposes costs on others who are not directly involved in the activity.
• B)Negative externalities can be internalized by offering subsidies to the agents who generate such externalities.
• C)Like public goods,externalities always result in a free rider problem.
• D)Externalities may arise from either production or consumption of a good or service.

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Definitions:

Auditors

Professionals or firms appointed to review and verify an organization's financial records and statements to ensure accuracy and compliance with accounting standards.

Financial Asset

An intangible asset whose value is derived from a contractual claim, such as stocks, bonds, and bank deposits.

Mutual Fund

A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, managed by an investment company.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.