In an Efficient Market Without Externalities

question 150

Multiple Choice

In an efficient market without externalities,

• A)price equals marginal private cost and is below marginal social cost.
• B)price equals marginal private cost and marginal social cost.
• C)price equals marginal private value and is below marginal external value.
• D)price equals marginal private value and marginal external value.

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Definitions:

Variable Manufacturing Overhead

Costs that vary in total in direct proportion to changes in the volume of production, such as indirect materials and utility costs directly tied to production.

Raw Materials

The basic materials from which a product is made, prior to any processing or manufacturing.

Price Variance

The difference between the actual price paid for something and its standard or expected price.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work done, multiplied by the standard labor rate.