Cost-Benefit Analysis Is Important to Determine the Role of Government

question 133

Multiple Choice

Cost-benefit analysis is important to determine the role of government in our economy because

• A)the government should provide all goods for which the benefits exceed the costs.
• B)cost-benefit analysis identifies the possible gains to society from government provision of a particular good.
• C)markets for private goods cannot effectively assign costs and benefits.
• D)cost-benefit analysis is the best tool to identify market failures.

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Definitions:

Effective Interest Rate

The actual return on an investment or the actual cost of a loan, taking into account the compounding of interest over time, as opposed to the nominal interest rate.

Short-Term Bank Loan

A loan obtained from a bank that has a short repayment period, typically less than one year.

Best Course of Action

The most suitable or advantageous strategy or decision to take in a given situation.

Annual Rate

The interest rate for a whole year, as opposed to a rate for a shorter period.