An External Cost, Such as the Cost Generated by Pollution

question 49

Multiple Choice

An external cost, such as the cost generated by pollution, is

• A) a cost paid by consumers of the product.
• B) a cost paid by producers of the product.
• C) a cost paid by a third party or by society at large.
• D) not a true opportunity cost of production.

---

Definitions:

Exercised

In finance, most commonly refers to the act of utilizing one's right to buy or sell an underlying financial instrument, such as stocks, as specified in a contract.

Put Option

A financial contract giving the option buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time frame.

At the Money

A term used in options trading to describe a situation where the market price of the underlying asset is equal to the strike price of the option.

Conversion Value

The value of a convertible security if it were converted into a different security, typically shares of the issuing company's stock.