Which of the following statements is true?A The marginal social costs of driving are greater than the marginal private costsB Pollution is one of the private costs of drivingC Insurance is one of the external costs of drivingD The marginal social costs of driving are less than the marginal private costs
Question
Which of the following statements is true?A The marginal social costs of driving are greater than the marginal private costsB Pollution is one of the private costs of drivingC Insurance is one of the external costs of drivingD The marginal social costs of driving are less than the marginal private costs
Solution
The correct statement is A. The marginal social costs of driving are greater than the marginal private costs. This is because the marginal social costs include both the private costs incurred by the driver (like fuel, maintenance, and depreciation) and the external costs borne by society (like pollution, road wear and tear, and traffic congestion). The marginal private costs only include the costs incurred directly by the driver. Therefore, the marginal social costs are greater.
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