To Internalize a Negative Externality

question 82

Multiple Choice

To internalize a negative externality:

• A)​a producer's costs could be reduced by an amount equal to the external cost resulting from the production of a good.
• B)​a producer's costs could be increased by an amount equal to the external cost resulting from the production of a good.
• C)​a producer could receive a subsidy equal to the external cost resulting from the production of a good.
• D)​None of the above are correct.

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Definitions:

Allowance Account

An account used to reduce the carrying amount of accounts receivable or loans to their net realizable value, reflecting expected losses due to uncollectibility.

Aging

A method used to categorize accounts receivable based on the length of time an invoice has been outstanding.

Accounts Receivable

Unpaid customer debts to a company for goods or services that have been supplied.

Bad Debts Expense

An expense reported on the income statement reflecting the cost of estimated uncollectible accounts receivable.