The Cost-Benefit Principle Indicates That an Action Should Be Taken

question 15

Multiple Choice

The cost-benefit principle indicates that an action should be taken:

• A) if the total benefits exceed the total costs.
• B) if the average benefits exceed the average costs.
• C) if the net benefit (benefit minus cost) is zero.
• D) if the extra benefit is greater than or equal to the extra costs.

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Definitions:

Expected Return

The anticipated return on an investment over a specified period, integrating all possible outcomes.

Portfolio Weights

Percentage of a portfolio’s total value in a particular asset.

Market Values

The listed market price for an asset or service available for immediate transaction.

Corporate Bonds

Debt securities issued by corporations to fund their operations, capital improvements, or expansions, offering periodic interest payments and the return of principal at maturity.