Question : The concept of marginal social cost refers to:
Option 1: The cost incurred by an individual or firm in producing an additional unit of a good or service
Option 2: The cost incurred by society as a whole in producing an additional unit of a good or service
Option 3: The cost incurred by the government in producing an additional unit of a good or service
Option 4: The cost incurred by consumers in producing an additional unit of a good or service
Correct Answer:
The cost incurred by society as a whole in producing an additional unit of a good or service
Solution : The correct answer is (b) The cost incurred by society as a whole in producing an additional unit of a good or service.
The concept of marginal social cost refers to the cost borne by society as a whole when producing an additional unit of a good or service. It takes into account not only the private costs incurred by an individual or firm in the production process but also any external costs or negative externalities imposed on third parties.
In economic analysis, the marginal social cost includes both the private cost (the cost directly borne by the producer, such as labor, materials, and capital) and the external cost (the cost imposed on society due to externalities, such as pollution, congestion, or resource depletion).
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