Suppose Erie Textiles Can Dispose of Its Waste "For Free

question 110

Multiple Choice

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains and losses (in thousands of dollars) for the three parties are listed below. $$\begin{array} { | l | c | c | } \hline & \text { With Filter } & \text { Without Filter } \\\hline \text { Gains to Erie } & \$ 200 & \$ 400 \\\hline \text { Fisherman } & \$ 180 & \$ 50 \\\hline \text { Bird Watchers } & \$ 130 & \$ 25 \\\hline\end{array}$$ If Erie Textiles does not install the filter, there will be a net social ______ of ______ (in thousands of dollars) .

• A)loss; $35
• B)gain; $75
• C)loss; $110
• D)gain; $200

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Definitions:

Materials

The raw inputs or components that are used in the manufacturing process to create finished goods.

Equivalent Units

A concept used in cost accounting to convert partially completed goods into the equivalent of fully completed units.

First-in

A term often used in inventory management that refers to goods sold or used in the same order as they were bought or produced.

Materials

The unprocessed materials and parts employed in goods manufacturing.