Suppose External Benefits Are Present in a Market Which Results

question 87

Multiple Choice

Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?

• A) The efficient price would be higher than $49.
• B) The efficient price would be lower than $49.
• C) The efficient price would also be $49.
• D) The efficient output would be less than 800 units.

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Definitions:

Overhead Costs

Expenses related to the operation of a business that cannot be directly linked to a specific product or service, such as utilities and administration salaries.

Indirect Labor

Labor costs not directly associated with the manufacture of products or performance of services, such as maintenance and supervision.

Activity Rate

A rate that determines the cost driver of a particular activity, used in activity-based costing to allocate costs to products or services.

Supervising

The act of overseeing and managing employees or processes to ensure that tasks are completed efficiently and effectively.