Question

The land on which the city would build the water park was recently occupied by old buildings that have been torn down. If the city does not build the park, the owners of the land will sell the land to individuals who will build small retail establishments. If the park is built, the city will pay exactly the same amount for the land that the private individuals would have paid. Using a diagram and providing a brief explanation, indicate the social opportunity cost of purchasing the land for the park.

Answer 1

The social opportunity cost of purchasing the land for the park is the income forgone by the owners that he gets by selling the land to an individuals who could have built small retail establishments ( individual's private cost ) plus the additional social cost (positive externality) that society would get by building the park-like pure air and natural beauty, scenic beauty, etc.

Diagram.is explained below

private marginal cost(opportunity cost )+ externality =social opportunity cost