The social cost of producing a commodity is equal to the:
A)the sum of fixed and variable costs.
B)the difference between the total cost and opportunity cost.
C)the sum of private and external costs.
D)the difference between the private and external cost.

Question

Quizplus · Accepted Answer

The social cost of producing a commodity includes both private costs (i.e., costs borne by the firm) and external costs (i.e., costs imposed on society as a whole). Therefore, the social cost is the sum of private and external costs. Option A is incorrect because it only includes the costs borne by the firm. Option B is incorrect because it subtracts the opportunity cost, which is not a cost incurred in the production process. Option D is incorrect because it only considers the difference between private and external costs, not their sum.

The Social Cost of Producing a Commodity Is Equal to The