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4.3.1 Identify the project that will be more beneficial to society.

4.3.2 Which sector usually applies cost benefit analysis?

4.3.3 Briefly describe the term cost benefit analysis.

4.3.4 Why is it important to do a cost benefit analysis?

4.3.5 How can CBA be used to prevent undesirable redistribution of income?

4.4 Briefly without the use of graphs, explain maximum prices and minimum prices as consequences of market failures.

4.5 Evaluate measures used by government to promote competition in the economy.

Answer :

4.3.1 To identify the project that will be more beneficial to society, a cost-benefit analysis (CBA) can be conducted to compare the expected costs and benefits associated with each project. The project with the higher net benefit (total benefits minus total costs) is generally viewed as more beneficial to society.

4.3.2 Cost-benefit analysis is typically applied in the public sector, such as government projects and policies, to evaluate the economic value of decisions that affect social welfare.

4.3.3 Cost-benefit analysis (CBA) is a method used to evaluate the total anticipated cost of a project compared to the total expected benefits, usually expressed in monetary terms, to determine the best course of action.

4.3.4 Conducting a cost-benefit analysis is important because it provides a systematic approach for calculating and comparing benefits and costs of a project, policy, or business proposal. It helps decision-makers allocate resources efficiently, ensuring that the benefits outweigh the costs.

4.3.5 Cost-benefit analysis can be used to prevent undesirable redistribution of income by ensuring that the net benefits of a project or policy are distributed equitably across different segments of society. It can identify who benefits and who bears the costs, allowing policymakers to make adjustments that address any imbalances.

4.4 Maximum prices (price ceilings) are set by the government below the equilibrium price to ensure that essential goods remain affordable for all consumers during times of market failure. However, this can lead to shortages as demand exceeds supply. Minimum prices (price floors), on the other hand, are set above the equilibrium price to ensure producers can cover their costs, particularly in agriculture. This can lead to surpluses, as supply exceeds demand, and often requires government intervention to purchase the excess.

4.5 Governments promote competition in the economy through various measures such as enforcing antitrust laws to prevent monopolies and anti-competitive practices, deregulating industries to reduce barriers to entry, and promoting trade liberalization to encourage foreign competition. These measures ensure that markets remain competitive, leading to innovation, fair prices, and improved product quality.

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