If a Manufacturer Does Not Have to Pay for Its

question 122

Multiple Choice

If a manufacturer does not have to pay for its contribution to pollution,it will produce

• A)Too much output from a social viewpoint.
• B)Inefficiently from a private viewpoint.
• C)Unprofitably from a private viewpoint.

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Definitions:

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor costs, such as utilities and rent for the factory.

Indirect Labor

Labor costs of workers who assist in or facilitate the manufacturing process but do not directly work on the product.

Prime Costs

Direct materials and direct labor costs that are directly associated with the production of goods.

Factory Overhead Costs

Expenses related to operating a factory that cannot be directly traced to specific units produced, such as electricity, maintenance, and rent of the factory space.