Which type of production may raise GDP but reduce social welfare?
Answer and explanation
Correct answer: Production of harmful addictive substances
GDP counts the market value of final goods and services, so legally recorded production of addictive or harmful substances can increase measured GDP. However, their consumption may cause illness, dependence, family harm, crime, and other social costs that GDP does not subtract fully. Therefore option A is correct. School construction, clean energy, and vaccination generally create productive or health benefits, although their exact welfare effects can still depend on context.
Frequently asked questions
What is the correct answer to this question?
Production of harmful addictive substances
Why is this the correct answer?
GDP counts the market value of final goods and services, so legally recorded production of addictive or harmful substances can increase measured GDP. However, their consumption may cause illness, dependence, family harm, crime, and other social costs that GDP does not subtract fully. Therefore option A is correct. School construction, clean energy, and vaccination generally create productive or health benefits, although their exact welfare effects can still depend on context.
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.
