A Tax on a Polluting Activity Could Internalize the Externality

question 23

Multiple Choice

A tax on a polluting activity could internalize the externality if it were set equal to the

• A)average cost of the pollution.
• B)marginal cost of the pollution.
• C)total cost of the pollution.
• D)moral cost of the pollution

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Definitions:

Job-Order Costing System

A costing method used to collect and assign manufacturing costs to individual units or specific jobs.

Manufacturing Overhead

All indirect costs associated with the production process, excluding direct materials and direct labor expenses.

Work in Process

Inventory that includes goods in production but not yet completed, often assessed in the manufacturing sector.

Direct Materials

The raw materials that are directly used in the manufacturing of a product, which are easily traceable to the finished product.