Answer to Question #146688 in Economics of Enterprise for rohan

Question

A government is planning to build a high speed railway through a large area of fertile land and scenic beauty. A decision to construct the railway will depend upon how the project is financed and the social costs and social benefits arising from its construction. Explain, with the aid of examples from the construction of a railway, the meaning of social costs.

Answer 1

Social cost is the total cost to society. It includes private costs and external costs. Construction of the railway may cause social costs like air pollution in the area, noise from machines and other construction machineries, climate change in the area as trees may be cut down to have way for the construction, and accidents in the area. Lack of enough food to the society as some of their land may be taken. Climate change in the area may also lead to low food production