In the Case of an External Cost, the Social Value

question 166

Multiple Choice

In the case of an external cost, the social value curve lies ______ the demand curve.

• A) above
• B) below
• C) with
• D) sometimes above and sometimes below

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Definitions:

Contribution Margin Ratio

The percentage of each dollar of sales that is available to apply to fixed costs and contribute to net income; calculated as unit contribution margin divided by unit selling price.

Unit Contribution Margin

The amount of revenue remaining per unit after deducting variable costs; calculated as unit selling price minus unit variable costs.

Unit Sales Price

The amount that a business charges for one unit of its product or service.

High-Low Method

A technique used in cost accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.