In the Case of a Negative Externality

question 41

Multiple Choice

In the case of a negative externality,

• A) marginal external costs are greater than marginal private costs.
• B) marginal external costs are less than marginal private costs.
• C) marginal external benefits are greater than marginal private benefits.
• D) marginal external benefits are equal to marginal private costs.
• E) none of the above

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Definitions:

Manufacturing Overhead Costs

Expenses related to the production process that are not directly tied to the product, such as rent, utilities, and salaries of managers.

Activity-based Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Production Order

A document issued to the manufacturing shop floor to produce a specific quantity of material within a certain timeframe.

Batch-level Activity

Activities and costs that are incurred whenever a batch of goods is produced, regardless of the size of the batch.