Suppose the Production of Cotton Causes Substantial Environmental Damage Because

question 60

Multiple Choice

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. Economists would consider the environmental damage that results from the production of cotton to be a(n) :

• A)relevant cost of production.
• B)relevant cost of production only if cotton farmers are charged a fine for the damage done.
• C)relevant cost of production only if the environmental damage negatively affects other firms.
• D)implicit cost of production that cotton farmers will take into account when determining their profit-maximizing level of output.

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Definitions:

Contra Asset

An account that is used to reduce the value of a related asset, such as accumulated depreciation reducing the book value of fixed assets.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, indicating the side which increases the account.

Allowance Method

A financial method that estimates the value of debts unlikely to be collected by determining uncollectible accounts each period's end.

Allowance for Doubtful Accounts

A contra asset account that represents the estimated proportion of accounts receivable that may not be collectable.