An Evaluator Doing a Cost-Benefit Study May Ignore Certain Benefits

question 24

Multiple Choice

An evaluator doing a cost-benefit study may ignore certain benefits when

• A) it has been shown that costs exceed benefits.
• B) some of the costs have been ignored as well.
• C) one is not interested in seeking to publish an article reporting the findings.
• D) it has been shown that some benefits exceed program costs.

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Definitions:

Price Takers

Market participants who accept prevailing prices because they have no power to influence the market price due to their small market share.

Perfect Competition

A market structure characterized by a large number of small firms, homogeneous products, free entry and exit, and perfect information, leading to firms being price takers.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output from each new unit of input will eventually decrease.

Profit-Maximizing Output

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