Public Goods Cost Benefit

Question 1

Three issues to determine preferences for public good 1)

Answer 1

preference revelation
preference knowledge
preference aggregation

Question 2

Social marginal cost

Question 3

Ways to measure costs

Answer 3

cash-flow v opportunity costs

Question 4

What are economic costs?

Question 5

opportunity cost for labor

Question 6

how is cost of labor impacted by min wage in imperfect market?

Question 7

rent

Question 8

present discounted value

Answer 8

next year’s $ = $1 - (1 +r) because not invested |discounting value

PDV = Future value / (1+r)^t

Question 9

contingent valuation

Answer 9

asking individuals to value option they are not currently experiencing, can not choose, is not available
How much would you pay to save 5 minutes on your drive?

Question 10

Issues with contingent valuation

Answer 10

isolation of issues matters
order of issues matters
embedding effect matters -

Question 11

alternative to contingent valuation

Answer 11

you could use wages, revealed preferences (willingness to pay for homes along commute)

Question 12

Which measurement method (contingent valuation, preferences, wages) is least accurate for measuring commute reduction

Answer 12

contigent valuation

Question 13

valuing human life - why do we need it?

Answer 13

Lifetime wages - present discounted value of your lifetime earnings

Question 14

What is contingent valuation for measuring life?

Answer 14

how much willing to pay for safety features

Question 15

compensation differential

Answer 15

how much willing wages for jobs with higher risks of death

Question 16

alternative to cost-benefit

Answer 16

cost-effectiveness

Question 17

is cost-benefit the be-all end all

Answer 17

policy priority in who is benefited
is there a cheaper way to achieve same or

Question 18

when we raise r

Answer 18

we are valuing future benefits more and so we’re willing to take more on

conservatives say that r is low is future - future