Which of the following is (are) true? a. An example of an externality is a situation...
Which of the following is (are) true?
a. An example of an externality is a situation where a bank opens a new office, and that new office causes loans issued at the bank's other offices to decrease.
b. In cash flow estimation, the existence of externalities should be taken into account if those externalities have any effects on the firm's long-run cash flows.
c. Externalities should be ignored in estimating a firm’s cash flows because they are usually beyond the control of the firm and difficult to predict.
d. BOTH A. and B. are correct.
e. None of the above are true.
Homework Answers
d. BOTH A. and B. are correct.
First case is negative within-firm externality and second case is they should be considered
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