Consider two possible public works projects: Project A and Project B. The costs and benefits of each project to each citizen depends on the citizen's height. The costs and benefits of each project to tall citizens and short citizens are summarized in the table below:
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- High-income people are willing to pay more thanlower-income people to avoid the risk of death.For example, they are more likely to pay for safetyfeatures on cars. Do you think cost–benefit analystsshould take this fact into account when evaluatingpublic projects? Consider, for instance, a rich townand a poor town, both of which are considering theinstallation of a traffic light. Should the rich town usea higher dollar value for a human life in making thisdecision? Why or why not?What is One of the most important aspects of any public project to quantify the benefits in dollars? Give an example?Project Repair highways Build new highways Build a new bridge Build a new tunnel Expand existing airport Total Cost (in millions) $100 $100 $100 $100 $100 Total Benefit (in millions) $80 $90 $140 $115 $130 This table shows the costs and benefits for some new projects that a local government is considering. Based on these costs and benefits, which project should the government select? O Build new highways O Expand existing airport O Build a new bridge O Build a new tunnel O Repair highways
- . Some dissenting scientists at Environment Canada disagree with the estimate of $1.50 for theenvironmental externality. They believe that the incidence of the externality is not constant acrossdifferent levels of production; instead the size of the externality is proportional to the level of output.That is, the larger is the output, the larger is the externality. Their research suggests that the truesocial cost of cereal production diverges from private costs at every level of production by an amountequal to ten percent of production (note: ten percent, not ten percentage points).The government would like to know the economic effects of implementing a tax to internalise theexternality in this case. Draw the diagram for this market and policy. Solve for all relevant Ps and Qs.Calculate producer surplus1. To set up wastewater plants and connect the trailer and low-income households to the nation's sewerage pipelines, a Cost Benefit Analysis (CBA) by a govt will use the following formula. (Choose the correct formula from the options below): a. WTP of Gainers x (discount factor) + WTP of Losers x (discount factor) >0 b. WTP of Gainers x (discount factor) WTP of Losers x (discount factor) >0The Forest Service is responsible for maintaining our commons forests, and controlling responsible access and safe usage of forest campsites and trails by the public. Currently, the forest service is trying to decide whether to increase the resources devoted to thinning parts of the forest in Eastern Washington so as to reduce the risk of wildfires. They thus took a survey of Washington Residents to see how much they would be willing to to pay in order to have better air quality and fewer wildfires. The results of the survey would be used by the government in making budgetary decisions about tax collection and revenue allocation for forest management. How much How much How much on would you be would you be would you be willing to pay willing to pay willing to pay PERSON to reduce the to reduce the to reduce the ns risk of forest risk of forest risk of forest fires by 10% fires by 30% fires by 50% 50 cordings 50 Amy ces Brian 15 Catherine 10 40 30 David 20 20 50 20 30 20
- Why is it likely that road maintenance in a city would be underprovided if maintenance were only provided privately? O The free rider problem Moral Hazard Adverse selection Market powerVan, Amy, and Carlos are the only voters in a small society and are considering whether to publicly finance a project. Indicate in the following table what each individual's vote would be and whether the public project will be funded. Name Marginal Cost Marginal Benefit Vote Van $300 $10 Amy $300 $305 Carlos $300 Total $900 $345 $660 If this same project were taking place in the private sector, a firm fund the project. In private markets, decisions to provide goods or services to the market are generally made if marginal benefits comparison, the decisions to provide goods and services by governments are made through may approve projects whose costs their benefits. marginal costs. In . As a result, governmentsSuppose that you are an economic-policy advisor. Environmental groups are pressuring you toimplement the highest-possible carbon tax, whileindustry groups are pressuring you to implementno carbon tax at all. Both argue that their positionmakes more sense economically. Explain to themwhat the most-efficient tax level will be, and whythere are costs to setting the tax too high or toolow
- A. How will the voters vote for putting a statue in the towns common area using the following data? B. Explain using cost/benefit analysis if this is the best outcome for the town? individuals dollar benefits to individuals tax levied on individuals 1 $1525 $1000 2 $1315 $1000 3 $505 $1000 4 $845 $1000 5 $1150 $1000The New York City Council is ready to vote on two billsthat authorize the construction of new roads in Manhattanand Brooklyn. If the two boroughs join forces, they can passboth bills, but neither borough by itself has enough powerto pass a bill. If a bill is passed, then it will cost the taxpayersof each borough $1 million, but if roads are built in aborough, the benefits to the borough are estimated to be $10million. The council votes on both bills simultaneously, andeach councilperson must vote on the bills without knowinghow anybody else will vote. Assuming that each boroughsupports its own bill, determine whether this game has anyequilibrium points. Is this game analogous to the Prisoner’sDilemma? Explain why or why not.Explain why governments sometimes proceed with a project even if the private costs exceed the private benefits