Which of the following statements regarding the valuing of costs and benefits is not correct?
A) The first step in evaluating a project is to identify its costs and benefits.
B) In the absence of competitive markets, we can use one-sided prices to determine exact cash values.
C) Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker.
D) Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations.

Question

Quizplus · Accepted Answer

In the absence of competitive markets, we cannot use one-sided prices to determine exact cash values. Without competition, prices are subjective and potentially biased, which means that we would need to take additional steps to estimate their true value. Therefore, statement B is not correct. The other statements are valid and important steps in the process of valuing costs and benefits.

Which of the Following Statements Regarding the Valuing of Costs