Question

Consider if external costs should be included in the automobile production.What costs do you think should be included as inventory in car production that do not fall in the descriptions we have seen thus far?

For full credit, please post a minimum of three external costs that you believe are not accounted for by automobile manufacturing businesses. Be specific as to what the external cost is and how it might be measured, just saying pollution will not suffice. You must also respond to two other posts with statements regarding how you would account for the costs proposed.

Just saying something is good, bad, or the like is insufficient. You must provide support for all assertions and valuations made.

Thank you very much.

Answer 1

External costs or externalities mean the social or environmental effects of the industry. These costs are very high but since it cannot be meausred in monetary terms , it is usually not accounted.

The external costs that should be included in automobile manufacturing industries:

Cliamtic change.

This is the external cost which is produced by almost every industry. The industries contribute to the water pollution by dumping industrial waste in the water. Smoke , dust and chemical wastes are by prodcy of the manufacturing process which is dumped in the environment. Also the automobile itself produces smoke which goes into the environment. All this together contributes to a large extent to the climatic change.

Costs for nature and landscape

Roads, parking spaces need significant amount of space. Agricultural land or uncultivated land is converted into motorways or parking lots to accommodate the over increasing demand created by the automobile industry.

Costs of energy dependency

While trains and tramway often run on electricity which can be generated through renewable sources or locally available fuel, cars run on petroleum derived fuels. Only a handful of countries are net exporters of petroleum. For developed countries this causes a political dependence.

The automobile industry directly or indirectly produces these costs . To account for such costs , the company should provide the same to some extent to the government for assistance in tackiling these issues. As public money is used for the improvement of these problems. The amount provided to the government should be included in the accounts as costs for the social and environmental problems products by it and it's products.