JUNE 2010 PAPER 1 Q16

[arvind0708]

14 The table shows some of the costs when a firm produces a good.
output
total cost to society
$
external cost
$
23 316 16
24 322 18
What is the additional cost to a firm of producing the 24th unit?
A $2 B $4 C $6 D $8

 

[nirajgrg]

Additional cost to firm refers to its private cost only
private cost = social cost - external cost
private cost of 23rd output = 316 - 16 = 300
private cost of 24th output = 322 - 18 = 304
hence it is $4 (B)