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If fuel sales rise because commuting time becomes longer in a city, what effect on GDP and welfare is possible?

Answer and explanation

Correct answer: GDP may rise but welfare may fall due to time loss and pollution

The governing concept is that GDP records market transactions but may omit external costs and lost non-market time. More fuel sales increase measured market output and can therefore raise GDP. Yet longer commutes consume leisure and family time, create stress, and may increase congestion and pollution. These costs can reduce welfare, so option B is correct. Options A and C are too certain, while D incorrectly excludes fuel sales from market production.

Related tags

CommutingFuel SalesExternal CostGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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