Final answer:
A cost-benefit analysis assess the economic feasibility of a project by comparing initial costs, ongoing expenses, and potential revenue streams, along with marginal costs and benefits, often depicted in a T-chart for clarity. Practical examples include purchasing new equipment for a company or investing in environmental protection measures with anticipated benefits such as enhanced ecotourism.
Step-by-step explanation:
The project's economic feasibility can be assessed by conducting a cost-benefit analysis, which involves comparing the sacrifices and gains associated with a decision. Evaluating initial costs, ongoing expenses, and potential revenue streams is essential for understanding the project's viability. A practical example of this would be a company considering the purchase of new equipment. The initial costs would include the purchase price of the equipment and installation fees, while ongoing expenses may encompass maintenance and operating costs. Potential revenue streams could be the increased production and sales resulting from the equipment's operation.
In this analysis, one must also consider marginal costs and marginal benefits, which refer to the costs and benefits associated with each additional unit produced or service rendered. For instance, the marginal cost of producing an additional widget with the new equipment versus the additional revenue from selling it. The cost-benefit analysis is represented on a T-chart, with costs on one side and benefits on the other, to facilitate comparison. This approach can also be applied to environmental protection, where costs might include implementation of sustainable practices and benefits could be improved public health and potential boosts in ecotourism.