If Firms Have to Account for External Costs in Production

question 59

Multiple Choice

If firms have to account for external costs in production, then they will produce an output level that is ________ the efficient level.

• A) at
• B) below
• C) above
• D) either above or below

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Definitions:

Minimum Return

The lowest acceptable rate of return on an investment that a person or company would consider worthwhile.

Investment

The allocation of resources, usually money, in expectation of generating an income or profit.

Target Costing

A pricing method where the selling price is set first, and then the target cost for producing the product is determined by subtracting a desired profit margin.

Desired Return

The specific profit that an investor aims to achieve from an investment.