Which of the Following Statements Concerning Cost- Benefit Analysis Is

question 8

Multiple Choice

Which of the following statements concerning cost- benefit analysis is true?

• A)Large potential benefits,regardless of their time horizon,always justify government intervention.
• B)Large potential costs,regardless of their time horizon,always preclude government intervention.
• C)Though benefits from a government policy can be accurately measured,costs are usually impossible to quantify.
• D)Though it is often difficult to estimate costs and benefits with precision,cost- benefit analysis can be useful in determining whether to implement a given government policy.
• E)Cost- benefit analysis can be used effectively by private firms but should not be used in the public sector.

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Definitions:

Total Variable Costs

The total of all costs that vary with the level of output, including costs such as materials and labor that change with the scale of production.

Profit-Maximizing Level

The output level at which a firm achieves the highest possible profit, where marginal revenue equals marginal cost.

Marginal Revenue

The additional income earned by selling one more unit of a product or service.

Profit-Maximizing Level

The point at which a firm produces at a level where the difference between total revenue and total cost is the greatest.