What Is Difficult About Estimating the Level of a Public

question 7

Multiple Choice

What is difficult about estimating the level of a public good that will maximize social welfare using cost-benefit analysis?

• A)The government cannot use cost-benefit analysis to estimate this.
• B)It is difficult for the government to use because it is hard to estimate the marginal costs of supplying a public good.
• C)It is difficult for the government to use because it is hard to estimate the marginal social benefits of supplying a public good.
• D)The costs of using it may make the provision of the public good prohibitive.

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Definitions:

Administrative Expense

Costs associated with the general administration of a business, such as salaries of executive officers, legal fees, and office supplies.

Investing Activities

Activities related to buying and selling long-term assets and various investments, which appear in a firm's statement of cash flows.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, allowing for trend analysis.

Financing Activities

Transactions related to raising funds or repaying investors, such as issuing debt or equity, or repaying loans.