In the Case of Producing a Good with a Negative

question 50

Multiple Choice

In the case of producing a good with a negative externality, a firm will likely consider only the _____ marginal costs of production, leading to production of _____.

• A) external; more output than is socially optimal
• B) private; more output than is socially optimal
• C) private; less output than is socially optimal
• D) external; less output than is socially optimal

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs are subtracted, indicating the portion contributing to covering fixed costs and generating profit.

Fixed Monthly Expenses

Recurring costs that do not vary in amount and are paid on a monthly basis, such as rent or loan payments.

Net Operating Income

Earnings from a company's core business operations, excluding deductions for interest and taxes.

Margin Of Safety

The excess of budgeted or actual dollar sales over the break-even dollar sales.