Cost-Benefit Analysis in Public Policy and Decision Making Quiz
Test your knowledge on CBA with 12 insightful questions covering discount rate, NPV, stakeholders, limitations, and more!
#1
Which of the following is a key step in conducting a Cost-Benefit Analysis?
Selecting the most expensive option
Ignoring externalities
Identifying and valuing all costs and benefits
Relying solely on intuition
#2
What does the term 'opportunity cost' mean in the context of Cost-Benefit Analysis?
The cost of missed opportunities due to a decision
The total cost of a project
The initial investment cost
The discount rate used in the analysis
#3
In Cost-Benefit Analysis (CBA), what does the term 'discount rate' refer to?
The interest rate used to convert future costs and benefits to present value
The total cost of a project
The rate at which benefits increase over time
The initial investment cost
#4
Which of the following is a limitation of Cost-Benefit Analysis?
It considers all externalities accurately
It is always easy to quantify and compare costs and benefits
It may not capture the distributional impact on different groups
It only considers short-term impacts
#5
What is the primary objective of conducting a Cost-Benefit Analysis in public policy?
To maximize costs
To minimize benefits
To evaluate whether the benefits outweigh the costs
To ignore externalities
#6
Which of the following is a social benefit in Cost-Benefit Analysis?
Increased profits for a business
Reduced air pollution leading to improved public health
Decreased government expenditure
Higher taxes on the population
#7
What is the role of stakeholders in the context of Cost-Benefit Analysis?
Stakeholders are not relevant in CBA
They are only considered in the benefits analysis
They are individuals or groups affected by the decision and may have an interest in the outcome
They are responsible for conducting the analysis
#8
What is the Net Present Value (NPV) in the context of Cost-Benefit Analysis?
The difference between total costs and total benefits
The sum of total costs and total benefits
The present value of benefits minus the present value of costs
The total benefits divided by the total costs
#9
Which of the following is an example of an intangible cost in Cost-Benefit Analysis?
Labor costs
Equipment costs
Environmental degradation
Material costs
#10
What role does sensitivity analysis play in Cost-Benefit Analysis?
It involves analyzing the emotions of decision-makers
It explores the impact of changes in key assumptions on the results
It calculates the total benefits of a project
It determines the discount rate
#11
What is the social discount rate in Cost-Benefit Analysis?
A rate used to calculate individual benefits
A rate used to discount the future benefits to their present value
A rate applicable only to government projects
A rate that considers only costs and ignores benefits
#12
In Cost-Benefit Analysis, what does the term 'shadow pricing' refer to?
Assigning a monetary value to intangible costs and benefits
Hiding the true costs of a project
Neglecting externalities
Excluding stakeholders from the analysis
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