Multiple Choice
Why is it generally easier to identify the social costs than the social benefits of international trade?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which of the following is an economic impact of computers related to externalities discussed in this lesson?
A
Computers have no effect on social benefits or social costs in the economy.
B
Computers can generate positive externalities by increasing productivity and innovation, benefiting society beyond the private user.
C
Computers eliminate all social costs associated with production.
D
Computers always lead to negative externalities by increasing pollution in all industries.
Verified step by step guidance1
Step 1: Understand the concept of externalities in microeconomics. Externalities occur when a decision causes costs or benefits to third parties who are not directly involved in the transaction. These can be positive (benefits) or negative (costs).
Step 2: Identify how computers might affect social benefits or social costs beyond the private benefits or costs experienced by the user or producer. Consider whether computers create additional benefits or costs for society as a whole.
Step 3: Analyze the options given. The statement that computers have no effect on social benefits or costs contradicts the idea of externalities, so it is unlikely to be correct.
Step 4: Recognize that computers can increase productivity and innovation, which can spill over to other firms and individuals, creating positive externalities. This means society benefits beyond just the private user.
Step 5: Understand that while computers might sometimes contribute to pollution (a negative externality), it is not accurate to say they always do so in all industries. Also, computers do not eliminate all social costs, so those options are incorrect.
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