ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fixed costs plus variable costs
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private benefits less private costs
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private costs plus external costs
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social benefits less external costs
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Detailed explanation-1: -Mathematically, this can be represented by Marginal Social Cost (MSC) = Marginal Private Cost (MPC) + Marginal External Costs (MEC). Social costs can be of two types-Negative Production Externality and Positive Production Externality.
Detailed explanation-2: -Social costs include both the private costs and any other external costs to society arising from the production or consumption of a good or service.
Detailed explanation-3: -Marginal Social Cost = MPC + MEC MEC is the Marginal External Cost, which can be positive or negative.
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.
Detailed explanation-5: -The total social cost of production includes or is equal to the sum of the external cost of the firms and the internal cost of the firm, also called the private cost.