Economists Propose That a Tax Intended to Correct for the Presence

question 82

Multiple Choice

Economists propose that a tax intended to correct for the presence of an externality should be based on:

• A)the action that creates the externality, rather than the externality itself.
• B)the externality itself, rather than the action that creates it.
• C)what is simplest to implement.
• D)what will likely generate the most revenue.

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Definitions:

Variable Overhead Spending Variance

The difference between the actual variable overheads incurred and the standard costs expected for the actual production level achieved.

Unfavorable

A term describing a situation or outcome that is negative or disadvantageous, often used in financial contexts.

Favorable

A term used in accounting and finance to describe results or variances that are better than expected or budgeted, indicating positive performance.

Variance Analysis

The process of analyzing the differences between budgeted and actual financial performance.