ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The private cost is any cost that a person or firm pays in order to buy or produce goods and services. This includes the cost of labour, material, machinery and anything else that the person of firm pays for.

Detailed explanation-2: -Private costs are the costs facing individual decision-makers based on actual market prices. Social costs are the private costs plus the costs of externalities. The prices are derived from market prices, where opportunity costs are taken into account.

Detailed explanation-3: -Private cost is different from social cost because the private cost is paid by a private individual or firm, whereas society pays the social cost. Society as a whole pays the externalities because when there is acid rain, it helps in the generation of electricity production.

Detailed explanation-4: -External costs (also known as externalities) refer to the economic concept of uncompensated social or environmental effects. For example, when people buy fuel for a car, they pay for the production of that fuel (an internal cost), but not for the costs of burning that fuel, such as air pollution.