Question

When will the private benefit from consuming a good differ from the social​ benefit?

A. when there is an​ externality, such as​ second-hand smoke generated by the consumption of cigarettes.
B. when there is an​ externality, such as fewer diseases generated by the consumption of vaccines.
C. when there is an​ externality, such as sulfur dioxide generated by the production of paper products.
D. when there is no​ externality, such as in the consumption of apples.
E. both a and b.

Answer 1

Answer: (E) Both A and B

Explanation:

  When the social cost get exceeding the private cost in the environment, then there is production of the negative externalities. on the other hand, when the social cost become less as compared to the private cost then, there is production of positive externalities.

The social cost are the type of cost that are paid by the overall members of the society for the activity included in the firm. The social cost is the combination of the private cost and the external cost.

Therefore, Option (E) is correct as the option (A) and (B) are the examples when the private benefits are consume a good are differ from social benefits.