The Optimal Mix of Output May Not Be Produced by an Economy

question 5

Multiple Choice

The optimal mix of output may not be produced by an economy because of the existence of

• A) Inequity.
• B) Internalities.
• C) Public goods.
• D) Production possibilities.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (materials, labor, and overhead) in product costs and treats fixed costs as period expenses.

Profit Reported

The financial gain disclosed by a business, typically over a specific period, after all expenses have been deducted from total revenues.

Production and Sales

The activities involved in manufacturing goods and then selling them to customers, reflecting the entire flow from production to revenue generation.