Legislation That Offers Immediate and Easily Recognized Benefits, at the Expense

question 9

Multiple Choice

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted, even when economic inefficiency results. In economics this is referred to as the

• A) long-term effect.
• B) political-fallacy effect.
• C) shortsightedness effect.
• D) inefficiency effect.

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Definitions:

Unfavorable Variance

A situation where actual results are worse than expected results, often indicating higher costs or lower revenues than planned.

Favorable Variance

A financial term indicating that actual costs were lower than the planned or standard costs in a budget.

Budgeted Amount

The total amount of money that has been allocated for a specific purpose or period of time.

Return on Assets

A financial ratio that measures the profitability of a company in relation to its total assets.