When a Person Does Not Have to Pay the Full

question 269

Multiple Choice

When a person does not have to pay the full costs for using a scarce resource, then

• A) the use of the resource is not affected since society pays for the resource.
• B) more of the resource will be used.
• C) the internal costs of using the resource are too high.
• D) the social costs of the resource are less than they would be if the "correct" amount of the resource were being used.

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Definitions:

Depreciation Write-Off

The accounting process of allocating the cost of tangible assets over their useful lives to account for declines in value.

Weighted Average Cost

A calculation that takes into account the varying costs and quantities of resources or components, producing a composite average cost.

Earnings Before Interest

Earnings before interest is a measure of a company's profitability that calculates earnings before the expense of interest is deducted; it’s part of the calculation used for EBIT (earnings before interest and taxes).

Unlevered Cost

The cost of financing a project or investment without any debt.