Economics (AS & A Level) · Oct / Nov 2021 · Paper 33 · Question 3
9708Private costs and benefits, externalities and social costs and benefits
A government plans to build a new railway line. One proposed route will pass close to residential areas causing increased noise levels. An alternative shorter route will pass through a nature reserve causing environmental damage but saves travel time for rail users. In using cost–benefit analysis, which combination shows what should be included as private cost (PC) and what should be included as external costs (EC)?
- Athe cost of building the railway line: EC; the increased noise levels: PC
- Bthe cost of building the railway line: EC; the increased noise levels: EC
- Cthe cost of building the railway line: PC; the increased noise levels: EC
- Dthe cost of building the railway line: PC; the increased noise levels: PC
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Correct answer: C. the cost of building the railway line: PC; the increased noise levels: EC
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