Suppose That Flower Gardens Create a Positive Externality Equal to $1

question 190

Multiple Choice

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

• A)They are equal.
• B)The equilibrium quantity is greater than the socially optimal quantity.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Job-order Costing

A cost accounting system that assigns manufacturing costs to an individual product or batches of products, ideal for customized orders.

Work in Process

Inventory that includes goods partially completed but not yet ready for sale, situated between raw materials and finished goods.

Direct Labour

The labor costs directly associated with the production of goods, easily traceable to the manufacturing process.

Direct Materials

Fundamental elements that can be directly connected to the manufacturing of a specific item.