Cost-Benefit Analysis Is Important in Determining the Role of Government

question 112

Multiple Choice

Cost-benefit analysis is important in determining the role of government in our economy because:

• A)the government should provide all goods in which benefits exceed costs
• B)cost-benefit analysis identifies the possible gains to society from government provision of a particular good
• C)markets for private goods are not able to effectively assign costs and benefits
• D)cost-benefit analysis identifies market failure

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Definitions:

Rental Rate

The cost associated with leasing a particular commodity, property, or piece of equipment per unit time.

Marginal Product

The extra production resulting from the increase of a particular input by one unit, assuming all other factors remain constant.

Output

The total amount of goods or services produced by a company, industry, or country within a specific period.

Isoquant

A graph that shows all the combinations of capital and labor that can be used to produce a given amount of output.