Use the following to answer question(s) : Correcting for Market Failure: External Cost
-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved as illustrated in the Exhibit.When the government intervenes to correct for the external cost, the output will _______ from _______ to _______ .
Definitions:
Direct Materials
Raw materials that are directly traceable to the production of specific goods or products.
Variable Overhead
Costs that fluctuate with production volume, such as electricity for manufacturing equipment, excluding fixed costs.
Excess Capacity
A situation where a company can produce more goods or provide more services than currently demanded, indicating unused productive potential.
Special Order
A one-time customer order often involving a large quantity and requiring a separate pricing or product specification arrangement.
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