The cost-benefit principle indicates that an action should be taken
A) if the total benefits exceed the total costs.
B) if the extra benefits are positive.
C) if the average benefits exceed the average costs.
D) if the resulting economic surplus is zero.
E) if the extra benefits are greater than the extra costs.

Question

Quizplus · Accepted Answer

The cost-benefit principle suggests that an action should be taken if the extra benefits outweigh the extra costs. This ensures that the decision will result in a net gain or surplus, which is the most desirable outcome. Choices A and C are close, but they focus on total benefits and average benefits, respectively, which may not provide a complete picture of the decision's impact. Choice D explicitly mentions economic surplus, but it is not necessary for the result to be zero. Therefore, the best choice is E.

The Cost-Benefit Principle Indicates That an Action Should Be Taken