To determine whether an action should be undertaken by comparing its total expected benefits to its total expected costs, one would perform a

• A. Cost-benefit analysis
• B. Tradeoff
• C. Incentive
• D. Goods

Answer: (A)

Cost-benefit analysis is the process of weighing all the expected benefits of an action against all the expected costs to decide whether to proceed. It’s the systematic way to determine if the net benefit is positive, by comparing the total benefits to the total costs. If benefits exceed costs, the action adds value and is worth undertaking; if costs exceed benefits, it’s not worthwhile. This approach is common in business and public policy because it puts different effects into a common measure, usually money, so they can be compared directly. The other terms describe something different: a tradeoff is about giving up one thing to gain another, an incentive is a motivating factor, and goods are tangible items. For example, evaluating a new subway line would involve weighing benefits like faster commutes and fewer accidents against construction and maintenance costs to decide if the project is worth doing.