Author Question: An example of a cost externality occurs when a mining company A) dumps waste in river upstream ... (Read 123 times)

ec501234 · **on:** Jul 1, 2018

An example of a cost externality occurs when a mining company

A) dumps waste in river upstream from a popular fishing spot.
B) produces coal that is not in demand in a recession.
C) underpays its employees.
D) overwork its employees.

Question 2

In terms of capital budgeting, explain the difference between risk and uncertainty.

What will be an ideal response?

angrybirds13579 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

A

Answer to Question 2

Uncertainty involves possible future events to which no probability values can be assigned, while risk involves such events to which probabilities can be attached to their outcome. Thus, risk adjustments can be made to expected cash flow values and/or opportunity cost rates of discount. With uncertainty, no such adjustments can be made.