Social Cost Benefit Analysis (SCBA)
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Questions and Answers

What is the main purpose of Social Cost Benefit Analysis (SCBA)?

  • To approve private investment projects by different government agencies
  • To evaluate public and private projects from a financial perspective
  • To assess the intangible costs and benefits of a contemplated course of action (correct)
  • To focus only on tangible benefits and costs in public projects

    • How does SCBA differ from financial analysis?

  • Financial analysis evaluates intangible costs and benefits
  • Financial analysis evaluates projects from the society's point of view
  • SCBA focuses only on tangible benefits and costs (correct)
  • SCBA considers only those costs and benefits falling on the decision maker

    • Why has SCBA become important for private investment projects?

  • Because they have to be approved by different government agencies (correct)
  • To focus only on tangible benefits and costs
  • To evaluate projects from a financial perspective
  • To assess the intangible costs and benefits of a contemplated course of action

    • What does SCBA evaluate in general?

    <p>All major intangible costs and benefits arising from a contemplated course of action</p> Signup and view all the answers

    When did SCBA start to gain importance in evaluating public projects?

    <p>In late 1960s and early 1970s</p> Signup and view all the answers

    What is the main limitation of financial cost-benefit analysis mentioned in the text?

    <p>It does not account for public goods and externalities.</p> Signup and view all the answers

    What characterizes public goods, as described in the text?

    <p>They are non-excludable and non-rival in consumption.</p> Signup and view all the answers

    What is an externality, as explained in the text?

    <p>An effect of one party's production/consumption activity on another party without any payment for the effect.</p> Signup and view all the answers

    What is the equilibrium condition for a private decisionmaker, as mentioned in the text?

    <p>Marginal Private Cost (MPC) equals Marginal Private Benefit (MPB).</p> Signup and view all the answers

    What is the difference between private and social benefits and costs, according to the text?

    <p>Social benefits and costs consider externalities, while private benefits and costs do not.</p> Signup and view all the answers

    What are the key differences between Social Cost Benefit Analysis and financial analysis?

    <p>SCBA evaluates all major intangible costs and benefits arising from a contemplated course of action, while financial analysis takes into account only those costs and benefits falling on the decision maker and focuses only on tangible benefits or costs.</p> Signup and view all the answers

    Why is Social Cost Benefit Analysis (SCBA) gaining importance in private investment projects?

    <p>SCBA is gaining importance in private investment projects as they have to be approved by different government agencies.</p> Signup and view all the answers

    What is the primary purpose of Social Cost Benefit Analysis (SCBA)?

    <p>The primary purpose of SCBA is to evaluate all major intangible costs and benefits arising from a contemplated course of action.</p> Signup and view all the answers

    How does Social Cost Benefit Analysis (SCBA) differ from financial cost-benefit analysis in terms of the costs and benefits evaluated?

    <p>SCBA evaluates all major intangible costs and benefits, while financial analysis takes into account only those costs and benefits falling on the decision maker and focuses only on tangible benefits or costs.</p> Signup and view all the answers

    In what way does Social Cost Benefit Analysis (SCBA) serve as a social decision-making machinery?

    <p>SCBA serves as a social decision-making machinery by evaluating all major intangible costs and benefits arising from a contemplated course of action.</p> Signup and view all the answers

    What are public goods, as described in the text?

    <p>Goods that are non-excludable and non-rival in consumption, leading to the free rider problem.</p> Signup and view all the answers

    What is the equilibrium condition for a private decisionmaker, as mentioned in the text?

    <p>Marginal Private Cost (MPC) equals Marginal Private Benefit (MPB).</p> Signup and view all the answers

    What are negative externalities, as explained in the text?

    <p>Harmful external effects of a project, such as pollution from local automobiles or noise pollution.</p> Signup and view all the answers

    What is the major source of differences between financial and social cost-benefit analysis?

    <p>Market failure, which causes the market price to be an inadequate indicator of economic benefits and costs from the society's viewpoint.</p> Signup and view all the answers

    How does Social Cost Benefit Analysis (SCBA) deviate from financial (private) cost and benefit analysis, according to the text?

    <p>SCBA does not include or reflect the social benefits and costs of a project, which are not accounted for in financial analysis.</p> Signup and view all the answers

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