If Project A has a cost of $2 and provides a benefit of $3 and Project B has a cost of $5 and provides a benefit of $8,which of the following statements is true?
A) The net benefit of Project A is $5.
B) An individual can optimize by choosing Project B.
C) Project A has a higher net benefit than Project B.
D) A shift from Project A to Project B increases the net benefit by $1.

Question

Quizplus · Accepted Answer

Project B has a higher net benefit than Project A since it provides $3 of benefit per dollar spent compared to Project A which provides only $1.50 of benefit per dollar spent. Therefore, an individual can optimize their decision by choosing Project B. Option A is incorrect because the net benefit of Project A is $1 ($3 benefit - $2 cost). Option C is incorrect since the net benefit of Project B is higher than Project A. Option D is incorrect because the shift from Project A to Project B increases the net benefit by $3 ($8 benefit - $5 cost) and not by $1.

If Project a Has a Cost of $2 and Provides