American Institute of Certified Planners (AICP) Practice Exam

What analysis compares community gains from a project against what the community must give up?

1. Cost Effectiveness Analysis

2. Cost Benefit Analysis

3. Fiscal Impact Analysis

4. Break-even Analysis

The correct answer is: Cost Benefit Analysis

Cost Benefit Analysis is the process that involves comparing the benefits that a community gains from a project with the costs or sacrifices that the community must make to implement that project. This analysis helps planners and decision-makers evaluate whether the expected benefits justify the resources expended, thus facilitating informed decisions regarding project approval or investment. In this type of analysis, both tangible and intangible factors are considered, including economic, social, and environmental impacts. This gives a comprehensive view of the project's overall value to the community. Benefits are typically measured in terms of monetary value, while costs can include direct expenses and opportunity costs—what could have been gained if resources were allocated elsewhere. By quantifying these elements side by side, Cost Benefit Analysis encourages a balanced assessment of a project's worth to the community. Other analyses listed serve different purposes. For instance, Cost Effectiveness Analysis focuses on the most cost-efficient way to achieve a specific outcome without weighing in on monetized benefits against costs. Fiscal Impact Analysis examines the financial effects of a project on local government revenues and expenditures, and Break-even Analysis determines the point at which total costs and total revenue are equal, providing insight into financial viability but not community impact. Thus, Cost Benefit Analysis is specifically designed to capture the trade-offs between project gains