Day: April 5, 2019

Which of the following is an external cost of production?

Select ONE answer:

1. The cost of a public relations campaign in support of a new ‘eco-friendly’ factory
2. The cost of installing environmentally-friendly equipment in a new factory
3. The cost of traffic congestion resulting from opening a new factory
4. The cost of transporting products from a new factory to international retail outlets

Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple choice question is suitable for Economics KS5 classes.

The answer is 3

1. An internal cost which concerns ‘eco-friendliness’ to an external cost.
2. A cost which applies to environmentally-friendly equipment to an external cost.
3. Correct: congestion costs as falling on a third party – the community.
4. A cost which applies to moving products outside the factory to an external cost in an economic sense.

 

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