How is a cost-benefit analysis different from a marginal analysis?
A cost-benefit analysis is a tool used exclusively by consumers. A marginal analysis is used only by producers and large businesses.
A cost-benefit analysis is designed to maximized profits. A marginal analysis is meant to identify if the returns on a decision will be positive or negative.
A cost-benefit analysis uses reason to achieve outcomes aligned with one’s objectives and interests. A marginal analysis compares needs and wants to determine the best action.
A cost-benefit analysis compares the cost of an action with its benefits. A marginal analysis compares the additional benefit of an action with the additional cost of it.
The correct answer is: A cost-benefit analysis compares the cost of an action with its benefits. A marginal analysis compares the additional benefit of an action with the additional cost of it.
Cost-benefit analysis is a broader concept that involves weighing the costs and benefits of a decision or action to determine if the benefits outweigh the costs. It takes into account all relevant costs and benefits, including monetary and non-monetary factors.
On the other hand, marginal analysis focuses specifically on the incremental or additional benefits and costs associated with a decision. It examines the additional benefit gained from increasing or decreasing the quantity of a certain activity or resource, compared to the additional cost incurred. It helps determine the optimal level of production or consumption by analyzing the changes at the margin.
Cost-benefit analysis can be used by both consumers and producers, while marginal analysis is applicable to both individuals and businesses, helping them make efficient decisions by comparing additional benefits and costs.