When the Benefits of Producing a Good or Service Spill

question 28

Multiple Choice

When the benefits of producing a good or service spill over to other people, rather than just the buyer, the spillover is referred to as

• A) a marginal cost.
• B) a Coasian good.
• C) an external benefit.
• D) an equilibrium social output.
• E) an external cost.

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Definitions:

Accrued Warranty Costs

Costs anticipated for the future repair or replacement of products, recognized in financial statements before the costs are actually incurred.

Pretax Accounting Income

The income an organization has earned before any taxes have been deducted, used to calculate taxable income after adjusting for any differences between accounting and tax regulations.

Enacted Tax Rate

The tax rate established by law that is applied to income or transactions.

Income Tax Expense

The total amount of income tax a company expects to pay to tax authorities relative to its taxable income.