Suppose That Policymakers Are Doing a Cost-Benefit Analysis on a Proposal

question 156

Multiple Choice

Suppose that policymakers are doing a cost-benefit analysis on a proposal to add traffic barriers to a motorway. These barriers will reduce the number of fatal accidents on this motorway. Which of the following statements is true?

• A) the benefits will always exceed the cost because reducing the risk of accidents is so valuable
• B) people will exaggerate the benefits of traffic barriers in a questionnaire on their values
• C) it is not possible to put a dollar value on someone's life
• D) the benefits will never exceed the cost, because people show they don't care about accident risks by buying unsafe cars

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Definitions:

Gross Method

An accounting practice where purchases are recorded at the total invoice cost without deducting any purchase discounts.

Net Method

An accounting approach where discounts for early payment are assumed to be taken and thus are deducted from the cost of purchases.

Accounts Payable

Short-term liabilities representing amounts owed to suppliers or creditors for goods and services received.

Non-Interest-Bearing Note

A promissory note with no interest charged on the principal; repaid at its face value at maturity.