Which of the Following Has a Positive Externality and Hence

question 28

Multiple Choice

Which of the following has a positive externality and hence can be underprovided?

• A) Chronically ill people are not allowed to buy insurance.
• B) health insurance purchased through an employer
• C) vaccination
• D) Health Maintenance Organizations
• E) None of the above has a positive externality.

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Definitions:

Discount Rate

In finance, it's the interest rate used to discount future cash flows back to their present value, often reflecting the cost of capital or rate of return.

Net Present Value (NPV)

A method used to evaluate the attractiveness of an investment opportunity, calculating the difference between the present value of cash inflows and the present value of cash outflows.

Cash Flows

The cumulative amount of capital moving into and leaving a company, impacting its liquidity.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used to assess the profitability of potential investments.