A cost-benefit analysis is part of which fundamental concept in economics?

• A. Market equilibrium
• B. Law of demand
• C. Rational decision-making
• D. Production possibilities frontier

Answer: (C)

Verified step by step guidance

1. Understand that cost-benefit analysis involves comparing the costs and benefits of different choices to make the best possible decision.
2. Recognize that this process is central to the concept of rational decision-making, where individuals or firms weigh the pros and cons before acting.
3. Recall that market equilibrium refers to the balance of supply and demand, which is a different concept focused on prices and quantities in a market.
4. Note that the law of demand describes the inverse relationship between price and quantity demanded, not the decision-making process itself.
5. Understand that the production possibilities frontier illustrates trade-offs in production capacity, but does not directly involve cost-benefit analysis for decision-making.