A Negative Externality Problem

question 43

Multiple Choice

A Negative Externality Problem

Demand for a good is given by Q = 100 - P. The private marginal cost of production is MCP = 10 + Q. There is a $10 per unit negative production externality in this situation.


-Refer to A Negative Externality Problem.Absent any intervention,the competitive market will produce

• A) 40 units.
• B) 45 units.
• C) 55 units.
• D) 60 units

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Definitions:

Direct Labor Hours

The total hours worked directly on the production of goods and services, often used in calculating labor costs.

Sales Salary Expense

The cost associated with compensating employees involved in the sales process, typically classified as a selling expense.

Overhead Application Rate

A rate used to allocate overhead costs to products or services, based on a specific formula or activity base.

Work In Process Inventory

Goods in various stages of production within a factory, not yet completed.