Assume That Production from an Electric Utility Caused Acid Rain

question 114

Multiple Choice

Assume that production from an electric utility caused acid rain. If the government imposed a tax on the utility equal to the cost of the acid rain, the government's action would

• A) externalize the externality.
• B) result in a marginal social benefit greater than the marginal cost of the electricity.
• C) be an example of supply side economic policy.
• D) internalize the externality.

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Definitions:

Cutting Department

A division in manufacturing where materials are cut to size or shape before moving to the next production phase.

Direct Labor Hours

The total hours worked by employees who directly participate in the production of goods detailed.

ABC

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

Overhead Costing Systems

Methodologies used to allocate indirect costs (overhead) to products or services, which may vary depending on the costing approach (e.g., traditional costing or activity-based costing).