Question

The social cost of cutting trees for firewood in a government forest is:

a. opportunity cost to the individual of cutting the wood.
b. the increased likelihood of flooding as more trees are cut.
c. the marginal costs of cutting the last tree.
d. the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees.

Answer 1

Answer:

d. the increased likelihood of flooding as more trees are cut plus the private cost of cutting the trees.

Explanation:

Social cost is defined as private cost incurred by individuals involved in a transaction along with external cost incurred by third parties that are not directly involved in the transaction. Basically it is the total cost to society for carrying out an activity or transaction.

In the given instance private individuals are incurring cost of cutting trees in a government forest, and the cost to the society at large is the increased likelihood of flood because the trees have been cut down.