Economics 9708 · AS & A Level · 7.4

7.4 — practice question

A cost-benefit analysis for a planned underground railway gave the following figures. (annual costs and benefits $ million) annual capital cost 10; operating and maintenance costs 3; fare revenue 6; savings to private travellers 5; savings to business 10; other economic benefits 7. What conclusion can be drawn from the figures?

  • AIf undertaken by the private sector there would be a loss of $13 million.
  • BIf undertaken by the private sector there would be a profit of $3 million.
  • CIf undertaken by the public sector there would be a net social benefit of $15 million.
  • DIf undertaken by the public sector there would be a net social cost of $1 million.

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