Cost-benefit analysis is important to determine the role of government in our economy because
A)the government should provide all goods for which the benefits exceed the costs.
B)cost-benefit analysis identifies the possible gains to society from government provision of a particular good.
C)markets for private goods cannot effectively assign costs and benefits.
D)cost-benefit analysis is the best tool to identify market failures.

Question

Quizplus · Accepted Answer

Cost-benefit analysis helps to identify the potential benefits to society from government provision of goods or services, and whether the benefits outweigh the costs. It helps to ensure that government resources are allocated efficiently and effectively, and can be used to justify government intervention in certain areas where market failures exist. Option A is incorrect as it disregards the cost element of the analysis, while Option C is incorrect as private goods can effectively assign costs and benefits. Option D is partially correct, but it only considers market failures and does not capture the full scope of cost-benefit analysis.

Cost-Benefit Analysis Is Important to Determine the Role of Government