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

Question

BlackTom AI · Accepted Answer

Question presents a statement to evaluate: 'Cost-benefit analysis considers WTP as a factor in decision-making.'
Option 1: True. This aligns with the core idea of cost-benefit analysis, where willingness-to-pay (WTP) represents the monetary value that individuals place on a good or service, and is used to quantify benefits in monetary terms to compare against costs. Incorporating WTP allows the analyst to translate benefits into a common unit (money) and assess whether overall benefits exceed costs.
Option 2: False. This would imply that WTP is not considered in cost-benefit analyses, which is incorrect because WTP is a fundamental input in many CBA frameworks. By ignoring WTP, one would neglect the consumer valuation of outcomes, leading to biased or incomplete conclusions.
In summary, recognizing WTP as a factor is consistent with standard practice in cost-benefit analysis, where both costs and benefits are evaluated in monetary terms to inform decision-making. The statement correctly reflects this approach, whereas claiming it is not considered would misrepresent the methodology.

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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