To Increase Efficiency

question 6

Multiple Choice

To increase efficiency,

• A)taxes are used to overcome both external benefits and external costs.
• B)subsidies are used to overcome both external benefits and external costs.
• C)subsidies are used to overcome external benefits, and taxes to overcome external costs.
• D)taxes are used to overcome external benefits, and subsidies to overcome external costs.
• E)public provision used to overcome external benefits, and vouchers to overcome external costs.

---

Definitions:

Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the standard hours worked and standard labor rate.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on standard cost.

Materials Price Variance

The difference between the actual cost of raw materials and the standard or expected cost, multiplied by the quantity of materials purchased.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (or budgeted) variable overhead based on a standard rate.