What method compares the costs and benefits of an action to decide if it is worth taking?

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

Answer: (C)

Weighing the costs and benefits of an action to decide if it’s worthwhile is the key idea. This is cost-benefit analysis: a systematic way to estimate and compare all the costs and all the benefits of a choice, including money and other effects like time, risk, and well-being. If the total benefits exceed the total costs, the action is worth taking; if not, it isn’t. An incentive is simply a factor that motivates action, not a method for evaluating choices. Goods are tangible items. A tradeoff is choosing between alternatives because resources are limited, but it doesn’t provide the formal framework to weigh costs and benefits. The cost-benefit analysis combines and compares both sides to guide the decision.