Which of the following best describes the difference between the social costs of using renewable resources and nonrenewable resources?

• A. Both renewable and nonrenewable resources have identical social costs since they are used for similar purposes.
• B. Renewable resources generally have lower social costs because they produce fewer negative externalities, such as pollution and resource depletion.
• C. Renewable resources have higher social costs due to their limited availability and greater environmental impact.
• D. Nonrenewable resources have lower social costs because they are more abundant and do not generate externalities.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of social costs in microeconomics. Social costs include both private costs incurred by producers or consumers and external costs (externalities) imposed on society, such as pollution or resource depletion.
2. Step 2: Recognize that renewable resources are naturally replenished over time, while nonrenewable resources are finite and can be depleted permanently.
3. Step 3: Analyze how the use of nonrenewable resources often generates significant negative externalities, such as pollution and environmental degradation, which increase their social costs.
4. Step 4: Consider that renewable resources typically produce fewer negative externalities because they are sustainable and less damaging to the environment, leading to generally lower social costs.
5. Step 5: Conclude that the key difference in social costs arises from the externalities associated with each resource type, making renewable resources generally have lower social costs compared to nonrenewable resources.