A Paint Firm Has Just Announced That It Will Be

question 42

Multiple Choice

A paint firm has just announced that it will be building a new plant in a small town that is currently experiencing a high level of unemployment. The new plant will create 500 new jobs in the area and will occupy unused land at the edge of town. The plant will also dump some harmful chemicals into the town's river. From an economic standpoint this dumping of chemicals

• A) is unimportant since the firm is reducing the unemployment in the region.
• B) creates a negative externality.
• C) is the production of a public good.
• D) creates a positive externality.

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Definitions:

Capital Lease

A lease treated as an acquisition of an asset and the incurrence of an obligation on the lessee's balance sheet, indicating a purchase and financing arrangement.

Lease Liability

An obligation representing the present value of future lease payments under a non-cancellable lease.

Operating Lease

A lease agreement that allows for the use of an asset but does not transfer ownership of the asset to the lessee, often with shorter terms.

Lease Asset

An asset that is subject to a lease agreement, where the lessee has the right to use the asset for the lease term.