Question

Economists calculate social welfare of a market or policy by adding up the costs and benefits and subtracting the costs from the benefits to find the total net benefits, if any, in dollars. Let's say you are uncharted of evaluating whether or not to renovate or relocate your company's production facility. List as many costs and benefits as you think relevant to this decision. Are there any impacts that might not be easy to measure in monetary terms? If so, how would you consider them? Also, how might the idea of opportunity cost affect your decision?

Answer 1

First , the costs of relocation are expenditure on renting new place , new machinery , new setup , ooprtunity costs of forgone market place etc . in case of renovation the costs of buiding and other fixed costs are involved .

Benefits from relocation maybe e closer proximity to market place causing reduction in transport costs , better environment for production , better availability of cheap labour etc . Benefits from renovation are implementing more robust method of production .

opprtunity costs of leaving the older place or shifting to a new location is difficult to measure in monetary terms . We can consider it by calcuating both explicit and implicit costs or calculating the economic costs and not only accounting costs .