Suppose a Firm Producing Roof Shingles Imposes a Negative Externality

question 115

Multiple Choice

Suppose a firm producing roof shingles imposes a negative externality on the surrounding area due to the noxious fumes emitted from the plant.The private marginal cost,social marginal cost and marginal benefit associated with the production of the shingles are given by the following equations: MCP = 5 + 2Q MCS = 10 + 3Q MB = 50 - Q
The marginal external cost at the competitive equilibrium is ________ per unit.

• A)$5
• B)$10
• C)$15
• D)$20
• E)$25

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Definitions:

Perpetual Inventory System

A strategy for managing inventory accounting that utilizes computerized point-of-sale systems and enterprise asset management software to immediately document sales or purchases.

Accounts Payable

Obligations a business has to its creditors, arising from the purchase of goods and services on credit.

Perpetual Inventory System

A system for accounting inventory that instantly captures the transactions of buying or selling via computerized point-of-sale systems and software for enterprise asset management.

Gross Method

An accounting practice where purchases are recorded at their full invoice price without deducting discounts that may later be received.