Question

An example of cost/benefit analysis is:

a) The research that led to the conclusion that the cost of treating childhood earaches has increased in the last two decades, with no significant change in outcomes.
b) Evaluating the financial performance of a company over the past year.
c) Conducting a market analysis to determine the potential profitability of a new product.
d) Assessing the impact of inflation on consumer purchasing power.

Answer 1

Cost/benefit analysis is the comparison of the costs and benefits of a decision. An example is evaluating the potential profitability of a new product, where different stakeholders consider what they will gain versus what they must give up.

Step-by-step explanation:

An example of cost/benefit analysis is evaluating the potential profitability of a new product. This involves comparing what will be sacrificed (costs) and what will be gained (benefits) to aid in decision-making. Costs refer to money, effort, and other resources given up, while benefits represent what is gained, such as money, time, experience, or other improvements. For instance, a city deciding whether to build a new community pool would consider the various values and costs to different stakeholders, such as renters and business owners, which is a straightforward example of a cost/benefit analysis applied in a social context. Economists also use this analysis for more complex scenarios, like crime reduction strategies, where the benefits of crime are weighed against the likelihood and severity of punishment.