An Example of a Positive Externality Is

question 131

Multiple Choice

An example of a positive externality is

• A)pollution because it affects people not directly involved with producing it
• B)a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors
• C)creating a monopoly
• D)driving a car that emits pollution
• E)cigarette smoking because this imposes an indirect cost on people around the smoker

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Definitions:

Intrinsic Value

The actual, fundamental value of an asset, based on underlying perceptions of its true value including aspects of both tangible and intangible factors.

Market Efficiency

The hypothesis that financial markets are "efficient" in reflecting information in the price of securities, making it impossible to consistently achieve higher returns without assuming higher risk.

Discount Rates

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, which helps to assess the attractiveness of an investment.

Fundamental Analysis

A method of evaluating a security that involves examining related economic, financial, and other qualitative and quantitative factors.