Final answer:
The effective cost of an asset can be less than the first cost if tax incentives, future savings, or earnings are considered, as in the investment example with a 4% return, resulting in future profits exceeding the initial cost. Social benefits, such as those seen with the Junkbuyers Company, might also contribute to the perception of a lower effective cost through broader economic impact.
Step-by-step explanation:
The statement that the effective cost of purchasing an asset is less than its first cost could be false or true, depending on various factors such as the presence of tax benefits, subsidies, or other incentives that might lower the net cost of the asset over time. For instance, a firm might consider the present discounted value of future benefits from the asset to determine if the investment is worth the initial cost. Taking into account these future savings and earnings can result in the effective cost being less than the first cost, such as in the case where a company invests at an effective rate of return of 4%, investing $183 million with the expectation of future profits that would exceed the cost.
Additionally, when referring to private and social benefits, the Junkbuyers Company example shows that the social benefits, such as reduced garbage and the associated cost savings to the city and households, can be greater than the private benefits realized by the transaction itself. These benefits might contribute to an asset's effective cost being perceived as lower due to the broader economic and social impact.