Failure to Consider the Impact of a Positive Externality from an Activity

question 194

Multiple Choice

Failure to consider the impact of a positive externality from an activity results in

• A) an internality.
• B) too little of that activity.
• C) scarcity.
• D) too much of that activity.
• E) a negative externality.

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Definitions:

Prudent Investor Rule

The prudent investor rule is a legal guideline advising trustees to manage others' funds by diversifying investments and taking a reasonable level of risk, as a prudent investor would.

Risky Investments

Investments that carry a high degree of risk of losing the principal amount invested, often associated with higher potential returns.

Liquidity Constraint

A situation where an individual or firm is unable to convert assets into cash quickly without significant losses.

Universal Life

A type of flexible permanent life insurance that offers the low-cost protection of term life insurance as well as a savings element, which is invested to provide a cash value buildup.