Figure 10-2

question 318

Multiple Choice

Figure 10-2. The graph depicts the market for plastic.
-Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, what price will the firm charge per unit of plastic?

• A)$4.00
• B)$6.00
• C)$7.00
• D)$10.00

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Definitions:

Contribution Margin Ratio

The contribution margin ratio is a financial metric that measures the proportion of revenue that exceeds total variable costs, indicating how much of each sale contributes to covering fixed costs.

Profit-Volume Ratio

A financial tool used to analyze the relationship between profit and sales volume, showing the impact of sales changes on profits.

Unit Contribution Margin

The dollars available from each unit of sales to cover fixed costs and provide operating profits.

Break-Even Point

The level of operations at which a company’s revenues and expenses are equal.