Which of the Following Statements Is TRUE

question 1

Multiple Choice

Which of the following statements is TRUE?
I. A Pigouvian subsidy reduces the market price to encourage consumption and correct for the underproduction of a good.
II. A Pigouvian tax increases the market price to discourage consumption and correct for the overproduction of a good.
III. Negative externalities create deadweight losses, but positive externalities do not.

• A) III only
• B) I, II, and III
• C) I and II only
• D) I only

---

Definitions:

Consolidated

Combined financial statements that present the assets, liabilities, and operating results of parent companies and their subsidiaries as a single entity.

Diversified

A risk management strategy that involves spreading investments across various financial instruments, industries, or other categories to reduce risk.

Responsibility Centers

These are parts or segments of a business for which individual managers are responsible, usually in terms of costs, revenues, or investment.

Cost Center

A business unit or department within an organization that does not directly generate revenue but incurs costs, used for budgeting and cost control.