When Comparing a Permit Trading System to the Use of a Pollution

question 32

Multiple Choice

When comparing a permit trading system to the use of a pollution charge

• A) a permit trading system requires more government intervention because the government must determine the permit price
• B) a permit trading system is inflexible because the number of permits cannot be adjusted
• C) a pollution charge generates revenue for the government on all units of pollution not abated
• D) pollution charges might create pollution hot spots

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Definitions:

Job-Order Costing

An accounting method that tracks the costs associated with creating a specific product or delivering a specific service, making it possible to calculate the profit on individual jobs.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate overhead costs to products or services based on a selected activity base.

Automated Shaper

A machine tool that operates under programmed control to shape materials.

Capacity

The maximum level of output that a company can sustain to make a product or provide a service.