Final answer:
The externality refers to variables that are outside the organization and not typically within the short-run control of top management.
Step-by-step explanation:
The externality refers to variables that are outside the organization and not typically within the short-run control of top management.
An externality occurs when a market exchange affects a third party who is external to the exchange, and it is also known as a 'spillover'. For example, if a company pollutes the environment while producing goods, the negative effects of pollution are external costs that can impact society but are not accounted for by the company.
In the context of the question, the externality represents factors and forces beyond the direct control of the organization, such as economic conditions, government policies, and competition.