Cost-benefit analysis is important in determining the role of government in our economy because:
A)the government should provide all goods in which benefits exceed costs
B)cost-benefit analysis identifies the possible gains to society from government provision of a particular good
C)markets for private goods are not able to effectively assign costs and benefits
D)cost-benefit analysis identifies market failure

Question

Quizplus · Accepted Answer

Cost-benefit analysis can help the government identify the potential gains to society from providing a particular good or service. This analysis can inform whether and to what extent the government should intervene in the market to provide public goods or correct market failures. Option A is incorrect because it suggests the government should provide all goods where benefits exceed costs, which is generally not feasible or efficient. Option C is incorrect because while markets may not always assign costs and benefits effectively, this is not the only reason why cost-benefit analysis is important. Option D is also incorrect because while cost-benefit analysis can identify market failures, this is not its only purpose.

Cost-Benefit Analysis Is Important in Determining the Role of Government