Suppose a Certain Good Provides an External Benefit

question 98

True/False

Suppose a certain good provides an external benefit. If the private cost of the last unit of the good that was produced is equal to the social value of that unit, then the sum of producer and consumer surplus is maximized.

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Definitions:

Variable Overhead Rate

Variable overhead rate is the cost per unit of indirect or overhead activities that vary with production volume, such as electricity for machinery.

Overhead Efficiency

The measurement of how effectively a business or project manages its overhead costs.

Fixed Overhead Budget

A plan that outlines anticipated fixed costs that do not vary with the level of production or sales.

Fixed Overhead Volume

The quantity of fixed overhead costs that do not change with the level of production or activity.