Question

The costs associated with engaging in a process to solve a particular pollution problem are referred to as:

A) External costs
B) Social costs
C) Transaction costs
D) Opportunity costs

Answer 1

Abatement costs are those incurred by firms to reduce pollution, while social costs also include additional external costs borne by third parties. Therefore, the correct option is B.

Step-by-step explanation:

The costs associated with engaging in a process to solve a particular pollution problem are referred to as abatement costs, or marginal abatement costs if measured by each additional unit. These are the expenses that firms incur when they take action to reduce the amount of pollution they produce. Pollution, being a negative externality, also entails social costs, which include both the private costs incurred by firms and the additional costs incurred by third parties outside the production process, like the costs of pollution.