If Pollution by One Firm Results in Higher Production Costs

question 66

Multiple Choice

If pollution by one firm results in higher production costs for another firm, this would be classified as a:

• A)Negative production externality.
• B)Negative consumption externality.
• C)Marginal private cost of production.
• D)Free Good.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable costs are subtracted, showing what's left over to cover fixed costs and generate profit.

Sales Volume

This refers to the total number of units of a product or service sold over a specific period.

Account Analysis

A method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst’s prior knowledge of how the cost in the account behaves.

Mixed Cost

An expense that contains both fixed and variable components, changing in total with the level of activity though containing a constant element.