Answer to Question #239275 in Microeconomics for Joy

Question

How can you compare the benefits to the cost?

Answer 1

1. Establish a frame work

It's good to identify the goals and objectives you intend to achieve. Decide on the metric to be used comparing benefits to costs. A common currency can be used to measure the two.

2. Identify your costs and benefits.

This involves compiling the two lists of projected costs and expected benefits of the proposed project. Costs here may include direct costs, indirect costs, intangible costs and opportunity. Benefits include direct benefits, indirect benefits and competitive benefits.

3. Assign a dollar amount or value to each cost and benefits to make comparing easy.

4. Tally total value of benefits and costs. If total benefits outnumber total cost then it's good to proceed with the project. If total costs outputs benefits then there is need to reconsider the proposal.