A Subsidy Is Sometimes Used by Government to Correct the Problems

question 211

Multiple Choice

A subsidy is sometimes used by government to correct the problems associated with

• A) negative externalities.
• B) positive externalities.
• C) internal benefits.
• D) external benefits.

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Definitions:

Payback Period

The duration of time it takes to recoup the cost of an investment.

Straight-Line Method

A depreciation method that allocates the cost of an asset evenly over its useful life.

Gross Revenues

The total amount of sales revenue generated by a company before any deductions are made for returns, allowances, and discounts.

Payback Method

A capital budgeting method that calculates the time needed to recoup the initial investment in a project, based on the project's expected cash flows.