Suppose a firm's CFO thinks that an externality is present in a project,but that it cannot be quantified with any precision-estimates of its effect would really just be guesses.In this case,the externality should be ignored-i.e.,not considered at all-because if it were considered it would make the analysis appear more precise than it really is.

Question

Quizplus · Accepted Answer

If the externality is potentially important,it should not be ignored,because then a large error might be made.At the very least,it should be discussed,and possibly the analysis should be done using several scenarios of the possible effects of the externality.

Suppose a Firm's CFO Thinks That an Externality Is Present