What is cost-benefit analysis? What are the steps involved in using cost-benefit analysis to make the optimal choice?
What will be an ideal response?
Cost-benefit analysis is a calculation that adds up the costs and benefits of a particular choice using a common unit of measurement. It involves the conversion of all costs and benefits into a common unit of measurement so that they can be compared. The difference between the benefits and costs of choosing an alternative is referred to as the net benefit of the alternative. The alternative with the highest net benefit is the optimal choice.
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Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8 percent, then the bank can make a maximum loan of
A) $0. B) $2 million. C) $8 million. D) $10 million.
The marginal product of labor can be defined as the change in
a. profit divided by the change in labor. b. output divided by the change in labor. c. labor divided by the change in output. d. labor divided by the change in total cost.