Which of the Following Is a Method Used by Government

question 286

Multiple Choice

Which of the following is a method used by government to cope with the situation in which production of a good creates an external benefit?

• A) removing property rights
• B) subsidizing production
• C) marketable permits
• D) running a lottery
• E) imposing Coasian taxes

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Definitions:

Variable Cost Method

A cost-plus method of pricing setting in which only the variable costs are included in the cost amount to which the markup is added.

Fixed Manufacturing Costs

Expenses that do not change with the level of production, such as rent, salaries of permanent employees, and depreciation of factory equipment.

Markup

The extra charge added to the purchasing cost of items to encompass both overhead expenses and profit, setting the sale price.

Contribution Margin

The excess of sales over variable costs; the excess of manufacturing margin over variable selling and administrative expenses.