-The Expected Damage to Innocent Third Parties Per Unit of the Good

question 45

Multiple Choice

-The expected damage to innocent third parties per unit of the good produced is shown as the "external cost" in Figure 27.1. An unregulated competitive market for the product produces a quantity of Q* units, which sell for a price of P* per unit. If the competitive industry were producing the socially optimal quantity of this product, the market price of the product per unit would be

• A)zero.
• B)P*.
• C)P′.
• D)P′-P*.

Evaluate the effects of fixed manufacturing overhead and direct labor costs on unit product costs and net operating income.

Understand the differences between absorption costing and variable costing systems.

Calculate net operating income under both absorption and variable costing methods.

Compute unit product costs under absorption and variable costing.

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