Which of the Following Would Be Classified as an External

question 4

Multiple Choice

Which of the following would be classified as an external cost?

• A) As more firms began hiring computer programmers, the salaries of computer programmers increased and therefore the firm's cost of production increased.
• B) You eat too much pizza and end up with a stomach ache.
• C) You are not able to study at night because there is so much noise coming from the dorm room next to yours.
• D) When you purchase a prescription drug you are not made fully aware of all the possible side effects that may result from taking the drug.

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Definitions:

Supply Chain Surplus

The total value generated by the supply chain, measured as the difference between the value of the final product to the consumer and the costs of the supply chain.

Supply Chain

A network of all entities involved in producing and delivering a specific product or service, from raw materials to end customers.

Bullwhip Effect

The phenomenon in supply chains where small fluctuations in demand at the retail level cause progressively larger variations in demand at wholesale, distributor, and manufacturer levels.

Lot Sizes

The number of units of a product that are manufactured or acquired in a single production run or order, affecting both inventory levels and production cost.