Use the Following to Answer Questions

question 267

Multiple Choice

Use the following to answer questions:
Figure: External Cost 1
-(Figure: External Cost 1) Refer to the figure. Paper mills are notorious for emitting horrible smells that impose external costs on those living around the mills. According to the figure, what is the market price and quantity of paper?

• A) P = $4; Q = 30
• B) P = $5; Q = 30
• C) P = $6; Q = 50
• D) P = $4; Q = 50

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Definitions:

Straight-line Depreciation

A method of allocating the cost of a tangible fixed asset over its useful life in equal annual installments.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Average Accounting Return

The ratio of the average net income that an investment generates to the average book value of the investment over its life.

Salvage Value

The estimated residual value of an asset after it has been fully depreciated and is no longer in use.