Weather forecasting
A. Because weather forecasting requires investment in expensive equipment that most individuals cannot afford, the social costs of weather forecasting are less than the private costs.
B. Because weather forecasting requires investment in expensive equipment that most individuals cannot afford, the social costs of weather forecasting are greater than the private costs.
C. Because a weather forecast is information that can be shared with anyone—including people who did not produce, pay for access to, or watch advertising associated with the forecast—the social benefits of weather forecasting are less than the private benefits.
D. Because a weather forecast is information that can be shared with anyone—including people who did not produce, pay for access to, or watch advertising associated with the forecast—the social benefits of weather forecasting are greater than the private benefits.
E. There is no divergence between social and private costs or social and private benefits.
The correct answer and explanation is :
The correct answer is D: “Because a weather forecast is information that can be shared with anyone—including people who did not produce, pay for access to, or watch advertising associated with the forecast—the social benefits of weather forecasting are greater than the private benefits.”
Explanation:
Social vs. Private Costs and Benefits:
- Private costs are the expenses borne by individuals or firms who invest in the production or provision of goods and services. In this case, weather forecasting involves private costs related to the purchase and maintenance of equipment, hiring meteorologists, and other operational expenses.
- Social costs refer to the broader societal expenses, which take into account both the private costs and any external costs (or benefits) that affect people beyond the direct consumers or producers. Weather forecasting can benefit the entire population, even those who did not directly contribute to its creation.
- Private benefits are the benefits that an individual or firm receives from consuming or producing a good or service. For example, if someone subscribes to a weather service or buys access to a detailed forecast, they receive direct benefits from the forecast.
- Social benefits are the total benefits experienced by society from a service or good. Weather forecasting provides a societal benefit because its information can be used by anyone (whether they paid for it or not). For example, if a government or business provides weather forecasting, individuals who did not pay for it can still use it to plan their activities, avoid harm from extreme weather, or optimize agricultural decisions.
Why Answer D is Correct:
Weather forecasts are public goods, meaning once they are created and made available, they can be consumed by anyone without diminishing their availability to others. This leads to positive externalities (spillover benefits), as people who didn’t pay for the forecasts or contribute to their creation still benefit from them. These benefits extend beyond the private individuals or organizations producing the forecasts, thus creating greater social benefits than private ones. This is an example of a public good where the social benefit (the broad societal advantage of everyone having access to the forecast) is larger than the private benefit received by those who funded it.
Other Options:
- A and B discuss the relationship between private and social costs but are incorrect because weather forecasting does not generally lead to higher social costs than private costs. The significant benefit, not the cost, extends to society.
- C is incorrect because the social benefits of weather forecasting exceed the private benefits, as the information is accessible to a wide audience and produces broader societal value.
- E is incorrect because there is typically a divergence between private and social benefits or costs in the case of public goods like weather forecasting.