Cost Benefit Analysis Quiz

Who originated the idea of economic accounting that led to Cost-Benefit Analysis?

• Alfred Marshall

• Jules Dupuit

• Thayer Watkins

• George Washington

Answer explanation

Jules Dupuit originated the idea of economic accounting that led to Cost-Benefit Analysis.

What is the common unit of measurement used in Cost-Benefit Analysis?

• Weight

• Money

• Distance

• Time

Answer explanation

The common unit of measurement used in Cost-Benefit Analysis is Money, as it involves comparing costs and benefits in monetary terms.

What is the discounted value of one dollar available t years in the future?

• (1+r)^t

• (1-r)^(-t)

• (1-r)^t

• (1+r)^(-t)

Answer explanation

(1+r)^(-t) is the correct formula for calculating the discounted value of one dollar available t years in the future.

How should valuations of benefits and costs be determined in Cost-Benefit Analysis?

• Based on random selection

• Based on expert opinions

• Based on revealed preferences in market choices

• Based on political considerations

Answer explanation

Valuations of benefits and costs should be determined based on revealed preferences in market choices, as they reflect the actual trade-offs individuals make when making decisions.

What is the relationship between market price and the quantity consumed according to the demand schedule?

• Inverse

• Direct

• Exponential

• No relationship

Answer explanation

The relationship between market price and the quantity consumed according to the demand schedule is inverse, meaning as the price increases, the quantity consumed decreases, and vice versa.

What is the net benefit of a project in Cost-Benefit Analysis?

• Total benefits multiplied by total costs

• Total benefits minus total costs

• Total benefits plus total costs

• Total benefits divided by total costs

Answer explanation

Total benefits minus total costs

What is the primary decision criteria for determining if a project is worthwhile in Cost-Benefit Analysis?

• Internal rate of return less than cost of capital

• Benefit/cost ratio less than one

• Total benefits less than total costs

• Net present value greater than zero

Answer explanation

The primary decision criteria for determining if a project is worthwhile in Cost-Benefit Analysis is having a Net Present Value greater than zero.

What was the Flood Control Act of 1936 significant for in the context of Cost-Benefit Analysis?

• It required economic analysis of public investments

• It introduced the concept of net social benefit

• It established the U.S. Corps of Engineers

• It funded water development projects

Answer explanation

The Flood Control Act of 1936 was significant for requiring economic analysis of public investments, making it the correct choice.

What is the equivalent economic value people place on their lives in Cost-Benefit Analysis?

• $200,000

• $100,000

• $400,000

• $300,000

Answer explanation

In Cost-Benefit Analysis, the equivalent economic value people place on their lives is $400,000, as it represents the monetary worth of a human life in such evaluations.

What is the primary purpose of Cost-Benefit Analysis?

• To determine if a project is worthwhile based on monetary value

• To estimate the total cost of a project

• To analyze historical data of projects

• To predict future economic trends

Answer explanation

The primary purpose of Cost-Benefit Analysis is to determine if a project is worthwhile based on monetary value, making it the correct choice among the options provided.