ACCA PM · Chapter 4 · Question 10 of 10
Using Hansen and Mendoza's classification of environmental costs, the cost of cleaning up a lake that has been polluted by a factory's waste water would be classified as which type of cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) External failure cost
Explanation
External failure costs arise after contaminants have been released into the environment, for example cleaning a polluted lake. Prevention costs are incurred to stop waste being produced, detection costs check compliance, and internal failure costs are incurred to deal with waste that has been produced but not yet released.
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