Question 1) Which of the following statements best defines private costs?

1) Which of the following statements best defines private costs?

A) They are internal in the sense that the firm or household must explicitly take them into

account.

B) They are costs borne by people other than those who commit the action.

C) They are synonymous with social costs.

D) They represent explicit costs incurred by business firms in the private sector.

2) Costs that are borne solely by the individuals who incur them are called

A) private costs.

B) public costs.

C) social costs.

D) external costs.

3) When the costs of an action are not fully borne by the two parties engaged in a transaction,

this is called a(n)

A) externality.

B) equilibrium.

C) property right.

D) internal cost.

4) Pollution created by auto exhaust fumes is an example of a situation in which

A) social costs are greater than private costs.

B) social costs are less than private costs.

C) social costs are equal to private costs.

D) social costs are approaching the shutdown point.

5) An individual who pays for personal auto repair has incurred a

A) social cost.

B) private cost.

C) negative externality.

D) positive externality

6) Private costs are the same as

A) implicit costs.

B) external costs.

C) public costs.

D) internal costs.

7) All of the following are private costs of operating an automobile EXCEPT

A) gasoline for the car.

B) depreciation of the vehicle.

C) car insurance.

D) harm to the environment from emissions.

8) Internal costs are

A) costs borne solely by the individuals who incur them.

B) costs borne by people in the same society as those who incur them.

C) costs borne by people working in the firm that incurs them.

D) all costs incurred in the marketplace.

9) To find the social cost of an action, add together

A) the external and accounting costs.

B) the private costs and the internal costs.

C) the external costs and the internal costs.

D) the internal costs and the private opportunity costs.

10) Society must pay the full opportunity cost of any activity

A) that uses scarce resources.

B) that causes costs to rise.

C) that increases revenues.

D) none of the above.

11) Social costs are

A) costs borne by society whenever a resource-using action takes place.

B) costs incurred by government and borne by all taxpayers.

C) costs incurred in governmental welfare programs.

D) external costs minus internal costs.

12) The total social cost of production is equal to

A) external cost minus internal cost.

B) internal cost minus external cost.

C) external cost plus internal cost.

D) internal cost plus opportunity cost.

13) There is “too much” steel production if the

A) social costs of steel production are significantly lower than the private costs.

B) social benefits of steel production are declining.

C) social costs of steel production are significantly higher than the private costs.

D) social costs of steel production are declining.

14) Social costs are

A) private costs plus any external costs.

B) the costs of the externality only.

C) costs incurred when common property is used.

D) the costs associated with reaching and enforcing agreements.

15) A social cost that is not fully paid by the individual using an aut

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