Externalities

question 85

Multiple Choice

Externalities

• A)Occur because of government failure.
• B)Are the costs or benefits of market activities that "spill over" onto third parties.
• C)Occur because of selfish consumers.
• D)Occur because demand is hidden.

---

Definitions:

Intangible Benefits

Advantages or gains that cannot be easily measured or quantified, such as brand reputation or employee morale.

Discount Rate

The interest rate used to discount future cash flows to their present value, often relevant in investment and finance decisions.

Capital Budgeting

The process by which a business evaluates and selects major capital investments based on their potential to generate additional revenue or reduce costs.

Simple Rate of Return

A method to evaluate the profitability of an investment by dividing the annual incremental net operating income by the initial investment cost.