Which of the following statement is incorrect 1 External Costs The negative effects on first parties...........

Finance (Phase -I & II) Alternate sources of finance

Which of the following statement is incorrect ?

1. External Costs: The negative effects on first parties, due to the consumption and production activities of others, are known as external costs.

2. External Benefits: The positive effects on third parties, due to the consumption and production activities of others, are known as external benefits.

only 1

only 2

Both 1 and 2

Neither 1 nor 2

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Explanation:

External Costs and Benefits :-

External Costs: The negative effects on third parties, due to the consumption and production activities of others, are known as external costs. In case of company XYZ, external costs due to cutting of trees may include damage to wildlife habitats, loss of plant species that could be used to develop medicines, global warming and interference with the lifestyle of local tribes.

External Benefits: The positive effects on third parties, due to the consumption and production activities of others, are known as external benefits. In Case of company XYZ, external benefits may include reduced transport costs and reduced transport time for tourist firms in the area due to construction of roads by company XYZ.