Alicia Buys a Beach House for $325,000 Which She Uses

question 11

Multiple Choice

Alicia buys a beach house for $325,000 which she uses as her personal vacation home.She builds an additional room on the house for $45,000.She sells the property for $450,000 and pays $22,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?

• A)$0.
• B)$54,000.
• C)$80,000.
• D)$99,000.
• E)None of the above.

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Definitions:

Negative Externalities

Costs suffered by a third party as a result of an economic transaction which the parties directly involved in the transaction do not fully account for.

Public Good

A product that one individual can consume without reducing its availability to another individual and from which no one is excluded.

Marginal Benefit

The incremental utility or satisfaction derived from the consumption or production of an additional good or service unit.

Marginal Cost

The increment in comprehensive expenses related to the generation of an extra unit of a good or service.