If a dam raises electricity production but submerges several villages, how should welfare be evaluated?
Answer and explanation
Correct answer: By considering both electricity benefits and displacement costs
Welfare evaluation should consider the complete social balance of a project rather than one output measure. A dam may create electricity, employment, and other benefits, but submerged villages can cause loss of homes, livelihoods, community networks, and environmental assets. These social costs must be compared with the benefits. Option C is correct; focusing only on output, project cost, or tax collection gives an incomplete assessment.
Frequently asked questions
What is the correct answer to this question?
By considering both electricity benefits and displacement costs
Why is this the correct answer?
Welfare evaluation should consider the complete social balance of a project rather than one output measure. A dam may create electricity, employment, and other benefits, but submerged villages can cause loss of homes, livelihoods, community networks, and environmental assets. These social costs must be compared with the benefits. Option C is correct; focusing only on output, project cost, or tax collection gives an incomplete assessment.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
