Question

A private cost of production is a cost that is borne by the ________ of a good or service.

A social cost of production is a cost that is ________.
A) consumer; borne by the producer and by everyone else on whom the cost falls
B) consumer; not borne by the producer but borne by other people
C) producer; not borne by the producer but borne by other people
D) producer; borne by the producer and by everyone else on whom the cost falls
E) producer; borne by the consumer

Answer 1

A private cost of production is borne by the producer, while a social cost of production is borne by the producer and others affected by the cost. The correct option is D.

Step-by-step explanation:

A private cost is borne by the producer of a good or service. A social cost of production is a cost that is borne by the producer and by everyone else on whom the cost falls.

Private costs include costs such as raw materials, labor, rent, utilities, and depreciation, which are directly incurred by the producer. On the other hand, social costs include additional costs incurred by third parties outside the production process, such as pollution and other environmental costs.

For example, if a factory pollutes the environment while producing goods, the cost of cleaning up the pollution is a social cost that is borne by everyone affected by the pollution, including the producer and the individuals living in the affected area.

Hence, Option D is correct.