The Leaky Cauldron is considering expanding and opening a second location. Which of the following is...
The Leaky Cauldron is considering expanding and opening a second location. Which of the following is an example of a negative within firm externality?
The new location is located next to a competitor
The new location is hard to access from the main highway
The new location attracts customers that typically went to the original location
The new location loses sales because of poor marketing
Homework Answers
Ans. The new location attracts customers that typically went to
the original location
Negative within firm externality means that the action of the firm
would have a negative feedback effect within the firm along with
the positive effect.
In this case, the sales would increase in the second location.
However, some of the increase in sales would be due to the
customers that typically went to original location now coming to
the new location.
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