Cost Benefit Analysis (CBA) MCQs With Answer

Introduction

Cost-Benefit Analysis (CBA) is a core tool in pharmacoeconomics used to compare the monetary value of all benefits and costs of healthcare programs, policies, or pharmaceutical interventions. For M.Pharm students, mastering CBA helps in assessing whether an intervention yields net social value, choosing among competing projects, and informing policy or budgeting decisions. This blog presents 20 focused MCQs with answers to deepen understanding of key elements: discounting, net present value, benefit–cost ratio, valuation methods (willingness-to-pay, shadow pricing, human capital), perspective, time horizon, sensitivity analysis, and transferability. These questions target analytical thinking and real-world application in pharmacoepidemiology and pharmacoeconomics.

Q1. What is the fundamental definition of Cost-Benefit Analysis (CBA) in pharmacoeconomics?

• Comparison of clinical outcomes without monetary valuation
• Comparison of costs and benefits in monetary terms
• Calculation of cost per unit of clinical outcome like QALY
• Assessment of drug safety profiles only

Correct Answer: Comparison of costs and benefits in monetary terms

Q2. Which decision rule is typically used in CBA to determine whether a project is economically desirable?

• Choose the option with the highest incremental cost
• Net present value (benefits minus costs) > 0
• Therapeutic efficacy improvement > 10%
• Number needed to treat (NNT) less than baseline

Correct Answer: Net present value (benefits minus costs) > 0

Q3. Why are future costs and benefits discounted in CBA?

• To inflate future values because money will be worth more
• To reflect time preference and the opportunity cost of capital
• To eliminate uncertainty in projections
• To convert clinical outcomes into utility scores

Correct Answer: To reflect time preference and the opportunity cost of capital

Q4. How should future health benefits be treated when performing a CBA?

• Count them at face value without adjustment
• Apply the discount rate to future monetary benefits to express them in present value terms
• Convert them to QALYs and ignore monetary valuation
• Treat future benefits as costs

Correct Answer: Apply the discount rate to future monetary benefits to express them in present value terms

Q5. What does the Benefit-Cost Ratio (BCR) represent?

• The ratio of incremental costs to incremental effectiveness
• The ratio of present value of benefits to the present value of costs
• The absolute difference between costs and benefits
• The percentage of budget spent on interventions

Correct Answer: The ratio of present value of benefits to the present value of costs

Q6. What is the primary purpose of using shadow prices in CBA?

• To overestimate project costs intentionally
• To adjust market prices to reflect social opportunity costs and market distortions
• To avoid discounting future values
• To convert QALYs into utility weights

Correct Answer: To adjust market prices to reflect social opportunity costs and market distortions

Q7. Which perspective is recommended for comprehensive CBA in health economics?

• Payer perspective only
• Provider perspective only
• Societal perspective including all costs and benefits irrespective of payer
• Manufacturer perspective only

Correct Answer: Societal perspective including all costs and benefits irrespective of payer

Q8. Which method is commonly used to monetize health benefits in CBA?

• Counting only direct medical costs
• Willingness-to-pay elicitation techniques
• Using only QALYs without monetary conversion
• Applying NNT to estimate monetary gain

Correct Answer: Willingness-to-pay elicitation techniques

Q9. The human capital approach values a life or health improvement primarily by:

• Surveying patient satisfaction scores
• Estimating the present value of expected future earnings lost or gained
• Using BCR thresholds arbitrarily
• Counting hospital bed-days saved only

Correct Answer: Estimating the present value of expected future earnings lost or gained

Q10. Which factor most limits the direct transferability of CBA results from one country to another?

• Universal clinical trial protocols
• Differences in local costs, epidemiology, and population preferences
• Standardized discount rates everywhere
• Identical pharmaceutical pricing globally

Correct Answer: Differences in local costs, epidemiology, and population preferences

Q11. How should the time horizon be chosen in a CBA for a long-term drug intervention?

• Use a short fixed horizon of one year regardless of intervention
• Choose a horizon long enough to capture all relevant future costs and benefits
• Always use the patient’s life expectancy as the horizon for costs only
• Limit to the duration of clinical trials only

Correct Answer: Choose a horizon long enough to capture all relevant future costs and benefits

Q12. What is the main role of sensitivity analysis in CBA studies?

• To remove uncertainty by fixing all parameters
• To assess how robust results are to changes in key assumptions and parameters
• To increase the estimated benefits artificially
• To determine clinical efficacy only

Correct Answer: To assess how robust results are to changes in key assumptions and parameters

Q13. What does the Internal Rate of Return (IRR) signify in the context of CBA?

• The discount rate at which the benefit-cost ratio equals zero
• The interest rate at which present value of benefits equals present value of costs (NPV = 0)
• The rate of inflation used in the analysis
• The rate at which costs escalate annually

Correct Answer: The interest rate at which present value of benefits equals present value of costs (NPV = 0)

Q14. When is Cost-Benefit Analysis preferred over Cost-Effectiveness Analysis?

• When clinical outcomes cannot be measured
• When benefits can be monetized reliably and comparisons across sectors are needed
• When only QALYs are of interest and monetization is impossible
• When the analysis requires only incremental cost per life saved without monetary valuation

Correct Answer: When benefits can be monetized reliably and comparisons across sectors are needed

Q15. How are intangible benefits such as pain relief typically valued in CBA?

• By ignoring them because they are not measurable
• Using contingent valuation or willingness-to-pay surveys to elicit monetary values
• By counting them as direct medical costs
• By applying a fixed international multiplier to all outcomes

Correct Answer: Using contingent valuation or willingness-to-pay surveys to elicit monetary values

Q16. What is the ‘benefit transfer’ method in economic evaluation?

• Transferring patients between treatment arms in a trial
• Using values estimated in one context and adjusting them for use in another context
• Moving budget allocations from one program to another
• Directly converting QALYs into dollars via a fixed rule

Correct Answer: Using values estimated in one context and adjusting them for use in another context

Q17. What problem can arise from double counting in a CBA?

• Underestimating total benefits
• Overestimating net benefits by counting the same effect multiple times
• Reducing the discount rate artificially
• Confusing clinical endpoints with costs only

Correct Answer: Overestimating net benefits by counting the same effect multiple times

Q18. What does a break-even analysis determine in project appraisal?

• The point where total benefits exceed variable costs only
• The point where total benefits equal total costs
• The maximum possible profit regardless of costs
• The minimum sample size for clinical trials

Correct Answer: The point where total benefits equal total costs

Q19. Which discount rate is commonly recommended for public health CBAs in many guidelines?

• A proprietary private sector rate set by manufacturers
• The social discount rate reflecting opportunity cost of public funds or national guideline rate
• Always zero to favour long-term interventions
• The inflation rate only

Correct Answer: The social discount rate reflecting opportunity cost of public funds or national guideline rate

Q20. How should equity concerns be incorporated into CBA results for health policy decisions?

• Ignore equity because CBA addresses only efficiency
• Complement CBA with distributional analysis or apply equity weights to benefits
• Convert equity into QALYs automatically
• Use the same monetary values for all population groups without adjustment

Correct Answer: Complement CBA with distributional analysis or apply equity weights to benefits

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