How Does Decision Making Under Profit-Maximization Compare with Benefit-Cost Analysis

question 6

Multiple Choice

How does decision making under profit-maximization compare with benefit-cost analysis?

• A)Benefit-cost analysis is more comprehensive than profit-maximization since it includes the value of consumer surplus.
• B)Even in the presence of externalities,profit-maximization leads to efficient outcomes,while benefit-cost analysis does not.
• C)Profit maximization internalizes the cost of externalities unlike benefit-cost analysis.
• D)A public program should be implemented on the basis of profit-maximization principles and not benefit-cost analysis.
• E)With profit-maximization the benefits and costs from a program are usually overstated.

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Definitions:

Sales

The total revenue a company generates from selling goods or services.

Solvency

The ability of a firm to pay its debts as they come due.

Liquidity

The ability of an asset to be quickly converted into cash without significant loss of value, indicating the ease with which a company can meet its short-term financial obligations.

Current Position Analysis

This is an evaluation of an organization's current financial status and performance, particularly focusing on its liquidity, solvency, and overall financial health.