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1.5: Cost-Benefit Analysis

Part of Basic Economic Concepts in AP® Microeconomics. Read the opening section, then create a free account for the full interactive lesson, practice, and progress tracking.

Cost-Benefit Analysis

Cost-benefit analysis (CBA) is a method used to evaluate whether the benefits of a proposed action outweigh its costs. It is a systematic approach that helps individuals, businesses, and governments make informed decisions about projects, policies, or investments. By comparing both the costs and benefits, CBA provides a framework for optimal resource allocation and investment, aiming to maximize total net benefits.

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