If real output rises by nine percent and estimated environmental damage rises by three percent, what should be done in welfare analysis?
Answer and explanation
Correct answer: Both output gains and environmental costs should be compared
Welfare analysis should not treat real output growth as the complete measure of social progress. The nine percent increase represents an important production gain, but the three percent increase in environmental damage is a cost that may reduce quality of life and future productive capacity. Analysts should assess the two effects together and consider the net result. Thus A is correct; B and C ignore the cost, while D rejects a useful but incomplete indicator.
Frequently asked questions
What is the correct answer to this question?
Both output gains and environmental costs should be compared
Why is this the correct answer?
Welfare analysis should not treat real output growth as the complete measure of social progress. The nine percent increase represents an important production gain, but the three percent increase in environmental damage is a cost that may reduce quality of life and future productive capacity. Analysts should assess the two effects together and consider the net result. Thus A is correct; B and C ignore the cost, while D rejects a useful but incomplete indicator.
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.
