Question

Lisa owns a factory that produces laptops. Identify the costs as private or social costs

1. Land for the factory and parking for employees

2. Lisa’s enterpreneurial ability

3. Equipment inside the factory

4. Air pollution created by the production of computers

5. Factory building

6. Unused scrap material piled in a nearby ditch

Answer 1

Private cost is the cost that is borne by the producer of goods and services and on the other hand, the social cost is the total cost of production including private cost and any external cost.

1. Land for the factory and parking for employees - Private cost

2. Lisa’s entrepreneurial ability - Social cost

3. Equipment inside the factory - Private cot

4. Air pollution created by the production of computers - social cost

5. Factory building - Private cost

6. Unused scrap material piled in a nearby ditch - Social cost