Should You Enter a Holiday Lights Display Contest?
Private Costs, Private Benefits, External Costs, or External Benefits
a. Increased traffic congestion and difficulty parking on your street.
b. Increased electric bill from the holiday lights.
c. Winning the holiday lights display contest.
Answer:
A) Increased traffic congestion and difficulty parking on your street. EXTERNAL COSTS AND PRIVATE COSTS
B) Increased electric bill from the holiday lights. PRIVATE COSTS
C) Winning the holiday lights display contest. PRIVATE BENEFITS
Explanation:
Private costs refer to the cost of providing a good or service. Private benefits refer to the benefits an individual obtains from consuming a certain good or service. External costs occur when producing and consuming a good or service generates negative externalities to other third parties. External benefits occur when producing and consuming a good or service generates positive externalities to other third parties.
Increased traffic congestion and difficulty parking on your street constitutes external cost. Increased electric bill from the holiday lights constitutes private cost. Winning the holiday lights display contest constitutes private benefit.
Private cost is cost paid only by the producer. In this question, it is only the person that is participating in the contest that would incur an increased electricity bill. Private benefit is an advantage that accrues only to the buyer or seller in a transaction. It is only the person that participates in the contest that would win the prize. External benefit is the benefit that accrues to other people in addition to the buyer and seller as a result of a transaction. For example, everyone is free to enjoy the beauty of the lights. External cost is the cost of a transaction that is paid by other people in addition to the buyer and seller as a result of a transaction.
A similar question was answered here.
You are considering whether to enter a holiday lights display contest that pays $1,000 to the winner. State whether each of the following constitutes private costs, private benefits, external costs, or external benefits - Check all that apply. a. Increased traffic congestion and difficulty parking on your street. b. Increased electric bill from the holiday lights. c. Winning the holiday lights display contest.
A) Increased traffic congestion and difficulty parking on your street. EXTERNAL COSTS AND PRIVATE COSTS B) Increased electric bill from the holiday lights. PRIVATE COSTS C) Winning the holiday lights display contest PRIVATE BENEFITS Explanation: Private costs refer to the cost of providing a good or service. Private benefits refer to the benefits an individual obtains from consuming a certain good or service. External costs occur when producing and consuming a good or service generates negative externalities to other third parties. External benefits occur when producing and consuming a good or service generates positive externalities to other third parties. Increased traffic congestion and difficulty parking on your street constitutes external cost. Increased electric bill from the holiday lights constitutes private cost. Winning the holiday lights display contest constitutes private benefit. Private cost is cost paid only by the producer. In this question, it is only the person that is participating in the contest that would incur an increased electricity bill. Private benefit is an advantage that accrues only to the buyer or seller in a transaction. It is only the person that participates in the contest that would win the prize. External benefit is the benefit that accrues to other people in addition to the buyer and seller as a result of a transaction. For example, everyone is free to enjoy the beauty of the lights. External cost is the cost of a transaction that is paid by other people in addition to the buyer and seller as a result of a transaction. A similar question was answered here.