Social costs & benefits / Market failure

What is meant by ‘social cost’?

• The cost to the producer of producing a good

• The cost to the government of providing subsidies

• The total cost to society, including both private and external costs

• The price paid by consumers

Which of the following is an example of an external cost?

• Wages paid to workers

• Pollution caused by a factory

• Rent paid on a building

• Transport costs for delivery

Private cost refers to:

• The cost borne by society

• The cost paid by the government

• The cost paid by the producer or consumer directly

• The tax on goods

Which of the following best represents a private benefit?

• Cleaner air from reduced car use

• Profit earned by a firm

• Reduced noise pollution

• Improved public health

External benefits are also known as:

• Social costs

• Positive externalities

• Private costs

• Public costs

Vaccination provides an external benefit because:

• It lowers government revenue

• It increases company profits

• It benefits others by reducing disease spread

• It increases private costs

Which of these is NOT a social cost?

• Loss of biodiversity due to deforestation

• Medical expenses paid by the government due to pollution

Which term refers to the full benefit gained by society from the consumption of a good?

• Social benefit

• External benefit

• Private benefit

• Subsidy

When external costs are not included in market prices, the market:

• Over-allocates resources to that good

• Under-allocates resources

• Operates efficiently

• Eliminates the good from the market

What is an example of a good with significant positive externalities?

• Cigarettes

• Education

• Alcohol

• Fast food