When Externalities Are Present, Market Prices Do Not Reflect All

question 41

True/False

When externalities are present, market prices do not reflect all the social costs or benefits of the activity.

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Definitions:

Overapplied

A situation where the allocated or applied costs in cost accounting exceed the actual costs incurred.

Underapplied

A term used in accounting when the allocated costs are less than the actual costs incurred.

Manufacturing Overhead

All indirect costs associated with the production process, including but not limited to utilities, maintenance, and depreciation on equipment.

Actually Incurred

Costs or expenses that have been realized or expended, as opposed to estimated or projected costs.