Use the Following to Answer Questions

question 138

Multiple Choice

Use the following to answer questions :
Figure: Efficiency and Pollution
-(Figure: Efficiency and Pollution) Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will exceed the marginal benefit of pollution by:

• A) $25.00.
• B) $16.67.
• C) $15.00.
• D) $0.00.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor.

Financial Leverage

Utilizing borrowed capital to amplify the possible returns on an investment.

Operating Leverage

An indicator of the degree to which sales growth affects operational profit, showing the ratio of a company's fixed costs compared to its variable costs.

Interest Expense

The cost incurred by an entity for borrowed funds, often reported on the income statement.