Final answer:
Both statements a and b are true. Benefit-cost analysis is essential for selecting among public works projects; when services are the same, cost comparison is sufficient.The correct option is that a benefit-cost analysis is almost always needed for a rational selection.
Step-by-step explanation:
For the economic comparison of alternative public works projects, a benefit-cost analysis is almost always needed for a rational selection. This is true because such analysis helps determine which project provides the best value by comparing the expected benefits and costs. However, when alternatives provide the same services and outputs, the selection process can be based primarily on comparing costs since the benefits are equivalent.
Benefit-cost analysis involves creating a T-shaped chart to compare costs on one side with benefits on the other. Costs are what is given up in terms of money, effort, and other sacrifices to gain something else. On the other hand, benefits represent what is gained from a decision, including monetary returns, time savings, experience, and other improvements.
Moreover, marginal analysis is used to determine if the incremental benefits of an additional unit of service or goods outweigh the incremental costs. If the marginal costs exceed the marginal benefits, resources could potentially be allocated more efficiently elsewhere. This kind of analysis provides insights on whether an investment should be made or resources redirected, as seen in various economic analysis sectors, including crime prevention and pollution abatement.
In summary, the correct answer to the student's question is that both a. and b. statements are true in different contexts. A benefit-cost analysis is a critical tool for rational selection in public works projects, and for projects with identical services, a comparison of costs could suffice for decision-making.