Medical Research Is Often Presented as an Example of a Positive

question 105

Multiple Choice

Medical research is often presented as an example of a positive externality.Which of the following options available to policymakers would encourage producers of medical knowledge to provide a socially optimal level of production?
(i) imposing price ceilings on selected medical procedures
(ii) placing taxes on the sale of prescription drugs
(iii) providing subsidies to these firms

• A)(i), (ii) and (iii)
• B)(i) and (ii) only
• C)(iii) only
• D)none of the above

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Definitions:

Standard Price

Standard price is a pre-determined cost assigned to materials, labor, and overheads to measure variances in budgeting and accounting.

Direct Materials

Raw materials directly used in the production of goods, easily traceable to the final product.

Theoretical Standard

A benchmark for the most efficient level of operating performance or cost control, assuming perfect conditions.

Fixed Overhead Volume Variance

The difference between the budgeted and actual overhead costs due to variations in production volume.