Total benefits to society equal private benefits plus external benefits

Total benefits to society equal private benefits plus external benefits

• A. Private Benefits
• B. External Benefits
• C. Social Benefits
• D. Public Goods

Answer: (C)

The total benefit to society is made up of what the person making the decision gains (private benefits) plus the extra gains that others enjoy because of the decision (external benefits). When you add these together, you get the overall impact on society, known as social benefits. That’s why the statement equals social benefits. Private benefits alone miss the spillovers that affect others, so they don’t capture the full effect. External benefits alone miss the private gains enjoyed by the decision-maker. Public goods are a type of good with non-excludability and non-rivalry, not a measure of total benefits.

The total benefit to society is made up of what the person making the decision gains (private benefits) plus the extra gains that others enjoy because of the decision (external benefits). When you add these together, you get the overall impact on society, known as social benefits. That’s why the statement equals social benefits.

Private benefits alone miss the spillovers that affect others, so they don’t capture the full effect. External benefits alone miss the private gains enjoyed by the decision-maker. Public goods are a type of good with non-excludability and non-rivalry, not a measure of total benefits.