Which of the Following Statements Regarding Historical Costs Is Correct

question 76

Multiple Choice

Which of the following statements regarding historical costs is correct?

• A)Historical costs represent what the firm paid for an input when it was purchased, adjusted for inflation.
• B)Historical costs vary depending on the method of depreciation a firm uses.
• C)Historical costs are a good indicator of the current opportunity cost of a piece of capital.
• D)Using historical costs can cause true economic profit to be under or over stated.

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Definitions:

Cap-And-Trade

An environmental policy tool that aims to reduce pollutants by setting a limit (cap) on emissions and allowing companies to buy and sell permissions (trade) to emit up to a certain limit, incentivizing pollution reduction.

Property Right

Legal rights to use, control, and derive benefits from a resource or property.

Pollution

The introduction of harmful substances or products into the environment, causing adverse effects on living organisms and ecosystems.

Public Good

A product or service that is provided without profit to all members of a society, either freely or by the government, and which is non-excludable and non-rivalrous.