An Externality Is Defined as

question 223

Multiple Choice

An externality is defined as

• A)an opportunity cost that is not considered, which causes inefficiency.
• B)a social cost that affects parties external to a transaction.
• C)a transaction that imposes a loss on one of the parties involved.
• D)a "cost of doing business" that cannot be allocated to any particular good.
• E)the increase in cost associated with increased production.

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Definitions:

Capital Structure

The composition of a firm's financing through a mix of debt, equity, and other financial instruments, affecting its risk and valuation.

Dividend Payout Ratios

The fraction of earnings paid to shareholders in dividends, usually expressed as a percentage.

Pretax Cost of Debt

The rate of interest a company pays on its borrowings before tax adjustments, often used in calculating the cost of capital for a company.

Retained Earnings

Profits that a company has kept or retained rather than paid out as dividends.