An Example of an Externality Is the Impact of

question 46

Multiple Choice

An example of an externality is the impact of

• A)bad weather on the income of farmers.
• B)the personal income tax on a person's ability to purchase goods and services.
• C)pollution from a factory on the health of people in the vicinity of the factory.
• D)increases in health care costs on the health of individuals in society.

Assess the impact of changes in fixed costs, variable costs, and selling price on the break-even point and contribution margin.

Interpret the significance of operating leverage and its effect on business profitability.

Analyze the effect of varying levels of sales on profit using cost-volume-profit (CVP) analysis.

Use scatter diagrams as a tool for analyzing past cost behaviors and estimating future costs.

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Definitions:

Gross Profit

The financial difference between the revenue generated from sales and the cost of goods sold, before deducting overheads, salaries, and other expenses.

Lodging And Meals

Expenses related to accommodation and food incurred during travel or business trips.

Break-even Analysis

is a financial calculation to determine the point at which revenue received equals the costs associated with receiving the revenue, indicating no profit or loss.

ELMS System

The process of dividing customers into varying size accounts.