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Discussion

Do-nothing should be the opening baseline in a benefit cost study when

  • A.the discount rate is disputed
  • B.the benefits are difficult to value
  • C.the project is genuinely optional
  • D.the alternatives have unequal lives

Answer: C

Correct answer: the project is genuinely optional

Do-nothing is a real alternative only when doing nothing is permissible. Where a bridge must be replaced or a standard must be met, the choice is among ways of doing it, and the baseline is the cheapest acceptable option rather than inaction.

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