Which of the Following Statements About Internalising a Negative Production

question 147

Multiple Choice

Which of the following statements about internalising a negative production externality is most correct?

• A) internalising a negative production externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced
• B) internalising a negative production externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced
• C) internalising a negative production externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced
• D) internalising a negative production externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced

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Definitions:

Direct Labor-hours

Represents the total hours of labor directly involved in manufacturing a product or delivering a service.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, typically based on hours of labor or machine hours.

Quantity Standard

A predetermined measure of the amount of input that should be used in the production of a single unit of product or service.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected (or standard) amount based on efficient operations.