Suppose a Firm Wants to Build a New Factory That

question 20

Multiple Choice

Suppose a firm wants to build a new factory that would add pollution to an already polluted area. Under an offset program, the firm must:

• A) install scrubbers and other government-mandated equipment.
• B) purchase pollution permits from the government.
• C) reduce or eliminate an old pollution source in the area.
• D) pay a tax which depends on the amount of pollution created.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or business activity, such as materials and labor.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Break-Even Point

The point at which total costs and total revenue are equal, meaning no net loss or gain, and one has "broken even."

Capacity Strategies

Approaches adopted by businesses to match their operational capacity with demand levels in order to maximize efficiency and customer satisfaction.