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CAIE A-Level Economics 7.4.7 Costs/benefits in decision analysis

Practise using private, external and social costs and benefits to judge projects, output choices and net social benefit.

Syllabus
2026–2028
Course
Economics 9708
Level
A2

Exam points

  • compare social benefits and social costs to decide whether a project should proceed
  • interpret marginal cost and benefit diagrams to find the welfare-maximising output
  • calculate or select the route with the greatest net social benefit from table data

7.4.7—Costs/benefits in decision analysis question 1

[Maximum number: 1]

An economist undertakes a cost-benefit analysis of the pollution resulting from a manufacturing process.

Which outcome is most likely to guide any recommendation about the optimal level of manufacturing output?

A

that the marginal social cost of manufacturing equals the marginal social benefit

B

that the marginal cost of pollution is zero

C

that the total revenue of manufacturing equals the total cost

D

that the total benefit of pollution is maximised

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