Effective Methods of Dealing with Externalities Would Include

question 11

Multiple Choice

Effective methods of dealing with externalities would include

• A) taxing firms that generate beneficial externalities.
• B) imposing fines equal to the difference between MSC and MPC on firms that generate beneficial externalities.
• C) giving a subsidy per unit equal to the difference between MSC and MPC to firms that generate beneficial externalities.
• D) restricting the output of firms that generate beneficial externalities.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the production process begins based on estimated costs and activity levels.

Job-Order Costing

An accounting method used to assign costs to specific products or jobs, typically utilized in custom or specialized production.

Direct Labor-Hours

A measure of the labor directly involved in the manufacturing or production process, calculated in hours.

Machine-Hours

A measure of production time, indicating how many hours machines were operated during a certain period, often used for allocating manufacturing overhead.