When External Costs Exist

question 81

Multiple Choice

When external costs exist,

• A)There is government failure.
• B)Market prices do not convey the full costs of production.
• C)The market achieves the optimal mix of output.
• D)Private costs are greater than social costs.

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled through the transfer of assets or services.

Assets

Resources owned or controlled by a business that are expected to produce economic value or future benefits.

Statement of Cash Flows

A financial report illustrating the total cash a company acquires through its operational endeavors and external financial sources, in addition to the cash spent on operational and investment activities over a defined period.

Balance Sheet

A financial statement that shows a company's financial position, detailing assets, liabilities, and shareholders' equity at a specific point in time.