The Race to the Bottom Scenario of Global Environmental Degradation

question 22

Multiple Choice

The race to the bottom scenario of global environmental degradation is explained roughly like this:

• A) Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution.
• B) Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution.
• C) Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.
• D) Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits.

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Definitions:

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Marginal Costs

The increase in cost due to the production of one further unit of a product or service.

Total Cost Function

An equation that shows the overall cost incurred by a firm in the production process, including both fixed and variable costs, as a function of the quantity of output produced.

Fixed Cost

Business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance premiums.