Human capital creates both private and social benefits, whereas physical capital creates only private benefit.

Which of the following options stands true in regards to the above statement?

The statement is true

The correct answer is option 1: The statement is true

Human capital creates both private and social benefits, whereas physical capital creates only private benefit. That is, benefits from a capital good flow to those who pay the price for the product and services produced by it. Human capital benefits not only the owner but also the society in general. This is called external benefit.