Why is grain production in the Great Plains considered largely unsustainable from the perspective of social costs and benefits?

• A. The region's climate ensures that grain production has minimal impact on the environment.
• B. Grain production in the Great Plains is subsidized, which eliminates all social costs.
• C. It leads to significant negative externalities such as soil erosion and depletion of water resources, increasing social costs beyond private costs.
• D. It generates positive externalities that outweigh any environmental concerns, making it sustainable.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of social costs and benefits in microeconomics. Social costs include both private costs borne by producers and any external costs imposed on society, such as environmental damage. Social benefits include private benefits plus any positive externalities.
2. Step 2: Identify the private costs and benefits of grain production in the Great Plains. Private costs are the expenses farmers incur, while private benefits are the profits and food produced.
3. Step 3: Recognize the externalities associated with grain production in this region. Negative externalities include soil erosion and depletion of water resources, which are costs not reflected in the market price of grain.
4. Step 4: Analyze how these negative externalities increase the social costs beyond the private costs, making the activity less sustainable from a social perspective.
5. Step 5: Conclude that because these social costs are significant and not fully accounted for by producers, grain production in the Great Plains is considered largely unsustainable despite any private benefits or subsidies.