Which term describes the individual use of products that can lead to externalities?

• A. Marginal cost
• B. Private consumption
• C. Social welfare
• D. Public goods

Answer: (B)

Verified step by step guidance

1. Understand the concept of externalities: Externalities occur when the actions of an individual or firm affect the well-being of others without these effects being reflected in market prices.
2. Identify the term related to individual use of products: The question asks for the term that describes how an individual's use of products can lead to externalities.
3. Recall definitions of the options: 'Marginal cost' refers to the cost of producing one more unit, 'Social welfare' relates to the overall well-being of society, 'Public goods' are goods that are non-excludable and non-rivalrous, and 'Private consumption' refers to the individual use of goods and services.
4. Connect the concept: Since externalities arise from individual actions affecting others, the term 'Private consumption' best describes the individual use of products that can lead to externalities.
5. Summarize: Therefore, the correct term is 'Private consumption' because it captures the individual behavior that can generate external effects on others.