Which of the Following Is True of a Negative Externality

question 98

Multiple Choice

Which of the following is true of a negative externality?

• A) Some costs are borne by a third party.
• B) The government can use subsidies to encourage firms to internalize the externality.
• C) The government must take over the production of this good so that the externality can be internalized.
• D) Some benefits accrue to a third party.
• E) Its existence always requires corrective measures by the government.

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Definitions:

Net Working Capital

Net working capital is a measure of a company's liquidity, calculated as the difference between its current assets and current liabilities.

Inventory

The total amount of goods and materials held by a business to be sold or used in production, including raw materials, work-in-progress, and finished goods.

Accounts Payable

Financial obligations that a company has to its vendors, recorded as liabilities on the company's balance sheet.

Accounts Receivable

Amounts receivable by a firm for goods or services rendered to customers, awaiting payment.