Final answer:
A social cost-benefit analysis accounts for a broader impact on society than a private analysis, which focuses on direct costs and benefits to the entity. Differences arise due to considering factors like unemployment and import quotas. For fuel-efficient car production, where private costs exceed social costs, a government subsidy can align production with social optimum.
Step-by-step explanation:
The question asks to discuss why there might be a difference between a private cost-benefit analysis and a social cost-benefit analysis under specific circumstances such as high unemployment and the imposition of an oil import quota. In the case of high unemployment, the social cost-benefit analysis might factor in the broader impact on the economy and society, like increased social welfare costs or decreased consumer spending due to lower aggregate income. With an imposed oil import quota, the private analysis might focus on the immediate costs and benefits to the importing company, while the social analysis would look at the wider impacts on national energy security, potential increases in domestic energy production, and environmental consequences.
When the marginal private costs of producing fuel-efficient cars are higher than the marginal social costs, and the private benefits are the same as the social benefits, the government can intervene to align production with the socially desirable level. One effective method for the government is to provide a production subsidy to the manufacturers. This subsidy would reduce the marginal private cost of production to match the marginal social cost, thus encouraging an increase in the production and sales of fuel-efficient cars to the socially optimal quantity, Q_social.