Cost-benefit analysis considers WTP as a factor in decision-making.

Question

BlackTom AI · Accepted Answer

The statement deals with whether willingness to pay (WTP) is incorporated in cost-benefit analysis. 
Option 1: True. In cost-benefit analysis, future benefits and costs are often monetized to enable direct comparison, and WTP is a common method to assign monetary values to non-market benefits or costs. This means individuals’ stated or inferred willingness to pay for a project’s outcomes is used to quantify benefits, making WTP a central factor in many CBAs. 
Option 2: False. If one claimed WTP is not considered, they would be ignoring a primary valuation approach used to translate benefits into monetary terms, which would undermine the core purpose of CBA. In standard practice, excluding WTP would misstate the true value of benefits and distort decisions. 
In summary, since cost-benefit analysis relies on translating preferences into monetary terms to compare costs and benefits, WTP is indeed a factor that is considered in the analysis.

25_4 ECN4010A Economics of Public Policy

Cost-benefit analysis considers WTP as a factor in decision-making.

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Cost-benefit analysis considers WTP as a factor in decision-making.

Governments use Cost-Benefit Analysis to ensure resources are used efficiently and public policies provide the greatest benefit.

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