Which economic concept is most directly applied when conducting a cost-benefit analysis to evaluate a proposed mine site?

• A. Marginal analysis
• B. Scarcity
• C. Opportunity cost
• D. Rational decision-making

Answer: (D)

Verified step by step guidance

1. Understand the concept of cost-benefit analysis: it involves comparing the additional benefits and additional costs of a decision to determine if it is worthwhile.
2. Recognize that marginal analysis is the economic concept that focuses on evaluating the incremental or additional changes in costs and benefits when making decisions.
3. Recall that scarcity refers to limited resources, which is a fundamental economic problem but not the direct method used in cost-benefit analysis.
4. Identify that opportunity cost is the value of the next best alternative foregone, which is important but not the primary focus in the step-by-step evaluation of costs and benefits.
5. Conclude that rational decision-making is the overarching principle guiding the use of marginal analysis in cost-benefit analysis, as it assumes decision-makers weigh additional costs and benefits to make choices that maximize their net benefit.