Private and Social Costs Quiz

What are private costs?

• Costs paid by the government

• Costs incurred directly by producers or consumers

• Costs imposed on third parties

• Costs unrelated to production

Which of the following is an example of a private benefit?

• Cleaner air due to reduced emissions

• Higher profits earned by a business

• Reduced congestion from public transportation

• Improved public health

What are external costs?

• Costs borne by producers

• Costs imposed on third parties due to an economic activity

• Costs related to production only

• Costs covered by consumers

Which of these is an example of an external benefit?

• A student gains skills from education

• A more educated workforce benefits society

• A company increases its profits

• A factory reduces its production costs

What are social costs?

• Private costs plus external costs

• Costs covered by the government

• Costs unrelated to production

• Private costs minus external costs

What are social benefits?

• Private benefits minus external benefits

• Private benefits plus external benefits

• Benefits received only by producers

• Benefits unrelated to consumption

What happens when external costs are ignored in decision-making?

• Resources are allocated efficiently

• Markets produce more than the socially optimal quantity

• Producers incur higher costs

• Social benefits decrease

Which of the following is NOT an example of a private cost?

• Wages paid by a company

• Raw materials purchased by a factory

• Health problems caused by pollution

• Utility bills for a business

How do governments address external costs?

• By reducing taxes

• By imposing fines or taxes on harmful activities

• By subsidizing private companies

• By limiting private benefits

What is the marginal private cost (MPC)?

• The cost borne by society as a whole

• The additional cost incurred by producers for one more unit

• The total cost of production

• The cost imposed on third parties