Which of the following is most likely considered an externality with respect to a business entity?
A) Maximizing the value of shareholders' wealth.
B) Managers using company assets for personal use.
C) Closing a plant, laying-off a significant portion of a town's population.

Question

Quizplus · Accepted Answer

Externalities refer to the costs or benefits that affect a party who did not choose to incur that cost or benefit. Closing a plant and laying off a significant portion of a town's population can have widespread effects on the community that are not directly accounted for by the business entity, such as increased unemployment rates, reduced local economic activity, and potential social issues, making it an externality.

Which of the Following Is Most Likely Considered an Externality