An Externality Occurs When the Activity of One Entity Directly

question 31

Multiple Choice

An externality occurs when the activity of one entity directly affects the welfare of another that is transmitted by market prices.

• A)True
• B)False
• C)Uncertain

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Definitions:

Model 240

A specific version or design of a product, indicated by the model number 240.

Incremental Manufacturing Cost

The additional cost incurred by producing one more unit of a product.

Production Increase

An uptick in the amount of products manufactured by a company over a set period.

Contribution Margin

The amount of revenue from sales that exceeds the variable costs associated with producing a good or service.