Which of the following statements is true regarding technological factors as external forces in the context of externalities, social benefits, and social costs?

• A. Technological factors can create externalities by affecting the social costs or benefits of production beyond what is reflected in private costs.
• B. Technological factors always lead to negative externalities in every market.
• C. Technological factors are unrelated to the concept of externalities in microeconomics.
• D. Technological factors only influence private costs and have no impact on social costs or benefits.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of externalities. Externalities occur when a third party is affected by the production or consumption of a good or service, and these effects are not reflected in market prices. They can be either positive (benefits) or negative (costs).
2. Step 2: Recognize the role of technological factors. Technological changes can influence how goods are produced or consumed, which can alter both private costs (costs borne by producers or consumers) and social costs or benefits (which include external effects on society).
3. Step 3: Analyze how technological factors relate to externalities. Since technology can change production methods or product characteristics, it can create new externalities or modify existing ones by affecting social costs or benefits beyond private costs.
4. Step 4: Evaluate the given statements. The statement that technological factors always lead to negative externalities is too absolute and incorrect because technology can also generate positive externalities. Similarly, saying technological factors are unrelated to externalities or only influence private costs ignores their broader social impact.
5. Step 5: Conclude that the correct understanding is that technological factors can create externalities by affecting social costs or benefits beyond private costs, which aligns with the first statement.