Recognition of Spoiled Units When Computing Output Units

question 92

Multiple Choice

Recognition of spoiled units when computing output units:

• A)highlights the costs of normal spoilage to management
• B)distorts the accounting data
• C)focuses management's attention on reducing spoilage
• D)Both A and C are correct.

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Definitions:

Pigouvian Subsidy

A financial incentive given by the government to encourage activities that have positive externalities, or beneficial effects on society that are not reflected in the market price.

Free Market

An economic system where prices for goods and services are determined by the open market and consumers, with minimal government intervention.

Optimal Pigouvian Tax

A type of tax designed to correct the negative externalities of a market activity, set at a level that equates the marginal social cost of the externality with the marginal private cost.

Socially Optimal

A condition where resources are allocated in a way that benefits society as a whole, maximizing overall welfare.