Yard Tool Company Makes and Leases a Backhoe to Zoe

question 7

Multiple Choice

Yard Tool Company makes and leases a backhoe to Zoe. Due to a defect attributable to Yard Tool's negligence, Zoe is injured in an accident in which her neighbor Aron is also hurt. In a product liability suit based on negligence, Yard Tool may be liable to

• A) Aron only.
• B) no one.
• C) Zoe and Aron.
• D) Zoe only.

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Definitions:

Implicit Costs

The opportunity costs of using resources owned by the firm for its own operations, without direct payment but with foregone opportunities.

Explicit Costs

Direct, out-of-pocket payments for wages, rent, and materials, among others, involved in the production of goods or services.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision or choice.

Implicit Costs

Indirect, non-out-of-pocket expenses which represent the opportunity costs of using resources owned by the firm for its operations.