Private cost and social cost:
Private cost is a cost acquired by a firm for production. It comprises both explicit costs and implicit costs.
Social costs are such costs that are not borne by the producing firm however are incurred by others in society. For illustration, whenever an oil refinery liberates its waste in the river causing water pollution, such a pollution outcome in tremendous health hazards that involve costs to the society as an entire.
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One way in which long-term performance can be rewarded is through the granting of directors’ share options. This sort of reward though has provoked considerable controversy.
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