An Externality Is Any Activity for Which an Individual Firm

question 41

Multiple Choice

An externality is any activity for which an individual firm or consumer does not take into account all

• A) of the ramifications of its actions on others.
• B) associated costs.
• C) associated benefits.
• D) associated costs and benefits.
• E) negative impacts on the economy.

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Definitions:

Variable Cost

Costs that vary directly with the level of production output, such as raw materials and labor costs directly involved in production.

Units

Measurements or quantities of a product or service that are produced or sold.

Sold

The past tense of sell, indicating that a transaction where goods were exchanged for money has been completed.

Conversion Cost

The combination of direct labor and manufacturing overhead expenses, representing the costs required to convert raw materials into finished products.