Theoretically,the NPV Is the Most Appropriate Method to Determine the Acceptability

question 83

Multiple Choice

Theoretically,the NPV is the most appropriate method to determine the acceptability of a project. A false sense of security can overcome the decision-maker when the procedure is applied properly but the positive NPV results are accepted blindly. Sensitivity and scenario analysis aid in the process by:

• A) changing the underlying assumptions on which the decision is based.
• B) highlights the areas where more and better data are needed.
• C) providing a picture of how an event can affect the calculations.
• D) All of these.
• E) None of these.

---

Definitions:

Marginal Social Cost

The total cost to society of producing an additional unit of a good or service, including both private costs and any external costs.

Coal Mine Pollution

Environmental contamination resulting from the operations of coal mining, including air and water pollution, soil degradation, and ecosystem disruption.

MSB = MSC

MSB (Marginal Social Benefit) equals MSC (Marginal Social Cost) represents the point of allocative efficiency in goods and services production, where social welfare is maximized.

Coal Mine Pollution

Environmental damage caused by the extraction and processing of coal, including water, air, and soil contamination.