The difference between social cost and private cost is a measure of the:

• A. consumer surplus
• B. external cost
• C. marginal utility
• D. producer surplus

Answer: (B)

Verified step by step guidance

1. Understand the definitions: Private cost refers to the cost borne directly by the producer or consumer involved in a transaction, while social cost includes both the private cost and any external costs imposed on third parties.
2. Recognize that external cost (or externality) is the cost that affects a party who did not choose to incur that cost, and it is the difference between social cost and private cost.
3. Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, which is unrelated to the difference between social and private costs.
4. Marginal utility measures the additional satisfaction from consuming one more unit of a good, which does not relate to cost differences.
5. Producer surplus is the difference between what producers receive and their costs, again unrelated to the difference between social and private costs.