Suppose a company that produces chemicals disposes of PCBs (a cancer-causing toxin)in the local lake.The private costs of production are incurred by __________; the social costs of production are incurred by ____________.
A) the company; the company
B) the company; people affected by the PCBs and the company
C) people affected by the PCBs; the company
D) people affected by the PCBs; people affected by the PCBs and the company

Question

Quizplus · Accepted Answer

The company incurs the private costs of production, which include the cost of disposing of the PCBs into the lake. However, the social costs of production are incurred by both the people affected by the PCBs (e.g. increased risk of cancer) and the company itself (e.g. potential lawsuits, loss of reputation). Therefore, the best choice is B as it takes into account both the private and social costs.

Suppose a Company That Produces Chemicals Disposes of PCBs (A