CFA Institute Sustainable-Investing Question Answer
Which of the following statements about externalities is most accurate?
A.
Externalities are reflected in the prices of commercial goods and services
B.
Private costs are higher than societal costs when externalities are negative
C.
Measures to internalize externalities can be taken by corporates or governments
The Answer Is:
C
This question includes an explanation.
Explanation:
Governments and corporations can take steps to internalize externalities,such ascarbon pricing, emissions regulations, or corporate sustainability initiatives.
Externalities (A) are not always reflected in market prices.
Negative externalities mean societal costs exceed private costs, not the other way around (B).
[References:, OECD Report on Environmental Externalities & Market Failures, CFA Institute ESG Impact Measurement Guide, UNFCCC Climate Policy & Externalities Report, ========, , ]
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