Which term describes the expenditure borne by producers in creating output and the costs incurred by consumers in acquiring goods and services?

• A. Social Cost
• B. Externalities
• C. Private Cost
• D. Private Benefit

Answer: (C)

Private costs describe the expenditures directly faced by those involved in a market transaction: the producer’s costs of turning inputs into output and the money a consumer pays to acquire the good or service. For example, a factory spends on wages and materials to make a widget, while a shopper pays the price to buy it. These costs are private because they affect only the producers and consumers, unlike social costs which include costs to others from external effects like pollution.