What Are Externalities

question 75

Multiple Choice

What are externalities?

• A)voluntary economic exchanges among individuals
• B)payments made by the government to citizens and businesses
• C)taxes paid by people who cannot afford to pay them
• D)costs imposed on people who are not direct participants in an activity

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Definitions:

Agency Cost

The costs arising from conflict of interest between principals (owners) and agents (managers), including monitoring expenditures and the costs of structuring operations to minimize issues.

Marginal Cost

The cost incurred by producing one additional unit of a product or service.

Claim Dilution

The reduction in the likelihood of recovery or the value of each creditor’s claim as a result of an increase in the number of claimants or claims against the same debtor or asset.

Secured Loan

A loan that is backed by collateral, providing the lender with assurance that the loan will be repaid.