Government Often Finds It Difficult to Cope with Externalities Because

question 66

Multiple Choice

Government often finds it difficult to cope with externalities because

• A)costs and benefits are difficult to assess in monetary terms.
• B)taxes and subsidies are ineffective in equating MSC and MSB.
• C)government has no authority to impose fines for air and water pollution.
• D)marginal private cost curves cannot be shifted.

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Definitions:

Overapplied

A situation where the allocated manufacturing overhead cost exceeds the actual manufacturing overhead costs incurred, resulting in an apparent surplus.

Underapplied

A situation where the allocated manufacturing overhead is less than the actual overhead incurred.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate manufacturing overhead costs to products, calculated before the accounting period begins based on expected costs and activity levels.

Total Costs Added

The total amount of direct materials, direct labor, and overhead costs incurred during a specific period for the goods produced.