Externalities Are Social Costs That Affect Parties External to a Particular

question 27

True/False

Externalities are social costs that affect parties external to a particular economic transaction.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment costs.

Net Income

The net income of a business following the deduction of all costs and taxes from its earnings.

Specific Identification Method

An inventory valuation method where costs are directly assigned to individual units of inventory, enabling precise profit margin calculations.