Which of the Following Activities, If Any, Represents an External

question 236

Multiple Choice

Which of the following activities, if any, represents an external benefit?

• A)​The benefit to a consumer from watching a film on DVD.
• B)​The reduction in air quality resulting from industrial development in an urban area.
• C)​The increase in the value of property belonging to your neighbors when you hire a landscaper to beautify your front yard.
• D)​The reduction in property values when a new airport is built in a neighborhood.

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Definitions:

Production Costs

Expenses directly and indirectly involved in creating a product, including materials, labor, and overhead costs.

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 unit of product.

Net Income

The total profit of a company after all expenses, including taxes, have been subtracted from total revenues.

Operating Expenses

Costs associated with running the day-to-day operations of a business, excluding costs related to production or manufacturing.