When Individuals Take External Costs and Benefits into Account

question 147

Multiple Choice

When individuals take external costs and benefits into account:

• A)there are no external costs.
• B)they internalize the externality.
• C)the government should intervene in the market.
• D)the market will not reach an efficient solution.

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Definitions:

Straight-Line Depreciation

A technique for spreading out the expense of a physical asset evenly over its operational lifespan.

Operating Cash Inflow

Cash generated from a company's primary business activities, excluding financing and investing flows.

After-Tax Discount Rate

The discount rate used in capital budgeting that accounts for taxes, providing a clearer picture of an investment's after-tax profitability.

Straight-Line Depreciation

A method for apportioning the cost of a tangible asset over its viable life in steady yearly figures.