Negative Externality Occurs When

question 4

Multiple Choice

Negative externality occurs when

• A)the production of a good harms third parties.
• B)the production of a good helps third parties.
• C)a buyer is sold inferior and damaged merchandise.
• D)the consumption of a good helps third parties.

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Definitions:

Absorption Costing

This accounting system ensures the inclusion of all manufacturing-related expenses, such as direct materials, direct labor, and both variable and fixed overheads, into the cost of producing a product.

Variable Costing

An accounting technique that incorporates just the variable costs of production (such as direct materials, direct labor, and variable manufacturing overhead) into the costs of products.

Fixed Overhead

Regular, static expenses that do not change with the level of production or sales, including rent, salaries, and insurance.

Net Income

The profit of a company after all expenses and taxes have been deducted from revenue.