A Positional Externality

question 25

Multiple Choice

A positional externality:

• A)can only occur in sports.
• B)arises in situations where absolute performance is judged.
• C)results in under investment in performance enhancement.
• D)occurs when an increase is one player's performance reduces the expected reward of the other players.

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Definitions:

Net Operating Income

A measure of a company's profitability calculated by subtracting operating expenses from operating revenues, excluding non-operating income and expenses.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Unit Product Cost

The total cost incurred to produce, market, and distribute a single unit of a product.

Variable Costing

This is an accounting method that only includes variable costs—costs that change with production volume—in the calculation of product cost.