In order to protect the quality of its nearby water resources, a community places a restriction on any housing development closer than 100 feet to a wetland. How might you estimate the social costs of this regulation?

The social cost of placing a restriction on any housing development closer than 10 feet to a wetland in order to protect the quality of nearby water resources can be estimated based on its impact on the community.

Explanation:

In estimating the social costs, consideration must be given to the following factors

1. Benefit of protecting water resources to the community.

2. Loss recorded by land owners, real estate developers and other related businesses.

3. Presence or absence of any form of compensation from the community to Land owners and other businesses affected.

Social costs are private costs borne by individuals directly involved in a transaction together with the external costs borne by third parties not directly involved in the transaction.

the sum of the private costs resulting from a transaction and the costs imposed on the consumers as a consequence of being exposed to the transaction for which they are not compensated or charged.

When the Marginal Social Benefit (MSB)  is less than Marginal Social Cost (MSC), there is social inefficiency.

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