Respuesta :
If a production process generates pollution, then a competitive market will produce more of the good than is socially optimal because firms ignore the costs of production that they do not incur. So, option (C) is relevant.
Give a brief account on Cost of production.
Cost of production can be regarded as the total expense incurred by a business to produce a good or render a service. Along with the raw materials and supplies utilized during production, labor costs are typically included in production costs.
Types :
A firm may spend money on various things when producing a good or providing a certain service. the following
1. Variable Costs: Variable costs are those that fluctuate according to the volume of output; they go up when production goes up and down when it goes down. With a production volume of zero, there are no related variable costs. Utility costs, direct labor costs, raw material costs, and commissions are some examples of variable costs.
2. Fixed Costs : Fixed costs, as contrast to variable costs, are constant regardless of the level of production, whether it be at zero or maximum capacity. The majority of production costs change from one period to the next; however, fixed costs are typically thought of as time-limited, meaning that they are linked to output for a certain period.
3. Total Cost : The total production cost includes all costs involved in the manufacture of a good or in the provision of services. It takes into account both variable and fixed costs.
4. Marginal Cost : In order to calculate the total cost increase resulting from the additional product, marginal cost is used to calculate how much it would cost to produce one additional product unit.
5 Average Cost : The average cost, which can be calculated in two ways—by dividing the total production costs by the quantity of product produced or by summing the average variable and fixed costs—is simply the expense incurred while manufacturing one unit or providing one service.
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