If a Negative Externality Results from the Refining of Oil

question 104

Multiple Choice

If a negative externality results from the refining of oil, the cost of production as seen by the oil refinery:

• A)does not include the external cost.
• B)includes the external cost.
• C)does not include the external benefit.
• D)includes the external benefit.
• E)equals the social cost of oil refining.

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Definitions:

Expense Accounts

Accounts used to record the costs incurred to operate a business, which are then matched against revenues to determine net income.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Net Loss

The amount by which total expenses exceed total revenues for a business over a specified period, indicating financial performance.

Nominal Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.