Answer to Question #216516 in Microeconomics for Y, Smith

Question

(1). Explain cost-benefit analysis. (2) Identify and explain the steps in performing a cost-benefit analysis.

Answer 1

1)A cost-benefit analysis (CBA) is a method of calculating the benefits of a choice or action minus the costs of that decision or action.

2)Step 1: Specify the set of options.Identify a range of genuine, viable, alternative policy options to be analysed.

Step 2: Decide whose costs and benefits count.

Step 3: Identify the impacts and select measurement indicators.

Step 4: Predict the impacts over the life of the proposed regulation.

Step 5: Monetise (place dollar values on) impacts.

Step 6:Discount future costs and benefits to obtain present values.