Government May Not Be Able to Determine the Optimal Amount

question 14

Multiple Choice

Government may not be able to determine the optimal amount of a public good because:

• A) it is easier to determine the costs and benefits associated with public goods than those associated with private goods.
• B) it is easier to determine the costs and benefits associated with private goods than those associated with public goods.
• C) the quantity of public goods provided by private parties is zero.
• D) there is no optimal mix of public and private goods.

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Definitions:

Factory Overhead

Factory overhead encompasses all the indirect costs involved in manufacturing a product, which may include utilities, maintenance, and management salaries, excluding direct materials and labor costs.

Direct Labor Costs

The total cost of all the labor force that is directly involved in the production process, measured by wages, salaries, and benefits of those who actually work on the product directly.

Overapplied

A situation where the overhead allocated to goods produced exceeds the actual overhead incurred.

Predetermined Overhead Rate

An estimated overhead cost rate used to allocate overhead costs to products or job orders based on activity levels.