ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Improving the quality of services
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Profit
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Minimising costs
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Allowing for social costs and social benefits (externalities)
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Detailed explanation-1: -In economics, these indirect costs which lead to inefficiencies in the market and result in a difference between the private costs and the social costs are called externalities. Thus, social costs are the costs pertaining to the transaction costs to the society as a whole.
Detailed explanation-2: -A social cost and benefit analysis helps to compare different alternatives for a project in an integrated manner. This is not just a financial consideration. After all, an SCBA also identifies other, non-financial effects. For example, when it comes to the effects on accessibility, the environment and the economy.
Detailed explanation-3: -The purpose of CBA in the public sector is to ensure resources are allocated efficiently to the competing priorities of the relevant governments. CBA provides a framework for evaluating these implications to ensure an efficient allocation of public sector resources.
Detailed explanation-4: -Social cost is the total cost paid for by the society due to the activities of a firm. It is the sum of all the external cost and private cost. Social benefit is the total benefit arising due to the production of goods and services by a firm. This is equal to the total of private benefits and external benefits.