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Three of the following justify comparing alternatives on cost alone. The exception is

  • A.only the means of providing a fixed service differ
  • B.the alternatives have different outputs
  • C.the alternatives provide the same service
  • D.the revenues are identical and cancel

Answer: B

Correct answer: the alternatives have different outputs

Cost-only comparison is valid when the benefits are identical and cancel. If the outputs differ, the alternative with the lower cost may simply be doing less, and choosing it on cost alone would be choosing the smaller service. The comparison must then be made on net worth rather than on cost.

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