Bad Managerial Judgments or Unforeseen Negative Events That Happen to a Firm

question 32

True/False

Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company-specific," or "unsystematic," events, and their effects on investment risk can in theory be diversified away.

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Definitions:

Marginal External Cost

The cost imposed on a third party by the production of an additional unit of a good or service.

Production Efficiency

A level of output where a company cannot produce more of one good without reducing the output of another good, utilizing resources optimally.

Pollution Damage

The harmful impact of pollutants on the environment, human health, and the economy.

Marginal Social Cost

The cumulative expense incurred by society for creating one more unit of a product or service, encompassing both direct private costs and any external effects.