An Example of an Externality Is the Impact of

question 46

Multiple Choice

An example of an externality is the impact of

• A)bad weather on the income of farmers.
• B)the personal income tax on a person's ability to purchase goods and services.
• C)pollution from a factory on the health of people in the vicinity of the factory.
• D)increases in health care costs on the health of individuals in society.

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Definitions:

Cost Flow Assumption

An assumption about how costs are removed from inventory and reported as cost of goods sold, influencing how inventory and profits are accounted for.

Variable Costing

An accounting method that only includes variable costs in product costs and treats fixed costs as period expenses.

Fixed Production Costs

Expenses that do not change with the level of production, such as rent for factory premises, salaries of permanent staff, and depreciation of machinery.

Inventory Cost

The total cost associated with acquiring, storing, and managing inventory, including purchase prices, storage costs, and shrinkage.