The total benefits to a society of an economic activity are called

• A. Private Benefits
• B. External Benefits
• C. Social Benefits
• D. Public Good

Answer: (C)

Total benefits to society from an economic activity are called social benefits. This includes both the gains to those directly involved (private benefits) and the extra advantages enjoyed by others who are not part of the transaction (external benefits). In other words, social benefits = private benefits + external benefits. When positive externalities exist, the overall benefit to society is greater than the private benefit alone, which is why governments sometimes encourage activities that generate external benefits. Private benefits alone refer only to the individual or firm involved, external benefits are the spillover to others, and public goods describe a type of good, not the total measure of benefits.