An Example of a Negative Externality Created in the Market

question 39

Multiple Choice

An example of a negative externality created in the market system would be

• A) poverty.
• B) unemployment.
• C) a change in one consumer's tastes and preferences.
• D) water pollution.

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Definitions:

Average Collection Period

The average number of days it takes for a company to collect payments from its customers, a measure of the efficiency of its credit policies.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Quick Ratio

A measure of a company's short-term liquidity, calculated as (Current Assets - Inventory) / Current Liabilities, indicating how well a company can meet its short-term financial liabilities.

Days' Sales in Inventory

A financial metric that estimates how long it takes for a company to turn its inventory into sales.