Which of the following can always be considered cost-effective in economic decision-making?

• A. Choosing the option with the lowest monetary cost
• B. Selecting the alternative with the highest benefit-to-cost ratio
• C. Purchasing goods in bulk regardless of need
• D. Avoiding all expenditures to maximize savings

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of cost-effectiveness in economic decision-making. Cost-effectiveness means choosing an option that provides the greatest benefit relative to its cost, not just the lowest cost alone.
2. Step 2: Recognize that simply choosing the option with the lowest monetary cost does not guarantee the best outcome because it ignores the benefits gained from that option.
3. Step 3: Learn that the benefit-to-cost ratio is a key measure in economics, calculated as \(\text{Benefit-to-Cost Ratio} = \frac{\text{Total Benefits}}{\text{Total Costs}}\), which helps compare alternatives by showing how much benefit is received per unit of cost.
4. Step 4: Understand why purchasing goods in bulk regardless of need is not always cost-effective, as it may lead to unnecessary spending and wasted resources, reducing overall benefit.
5. Step 5: Recognize that avoiding all expenditures to maximize savings is not cost-effective either, because some spending is necessary to generate benefits or maintain well-being, so the best choice balances costs and benefits.