Section 6: Tradeoff Analysis

Question 1

Explain what social cost-benefit analysis is and its main goal

Answer 1

Social CBA compares costs and benefits in a single unit.

The goal is to find the most economically efficient outcome

Question 2

When discounting, which value is higher: present or future?

Answer 2

Future since PV=FV/(1+r)^t

Question 3

List some limitations of CBA

Answer 3

1. Uncertainty in monetization and future costs/benefits
2. Assumes weak sustainability
3. Ignores distributions of costs and benefits
4. Ignores the marginal utility of money (different income groups)

Question 4

Define cost-effectiveness analysis

Answer 4

Assumes a particular environmental goal and examines the cost of achieving that goal by different means

Question 5

Expected Value (EV) = sum of ( __ x __)

Answer 5

NPV x Probability

Question 6

Picking an option with the highest expected value is being ___

Answer 6

Risk neutral

Question 7

Picking an option with the best possible outcome is an example of being ____

Answer 7

Risk seeking

Question 8

Picking an option with the least bad possible outcome is an example of being ___

Answer 8

Risk-averse

Question 9

In Multi-attribute Tradeoff Analysis, costs and benefits are represented in their ___

Answer 9

Natural units

Question 10

What kind of discount rate would lead to more climate action in the present day?

Answer 10

A low discount rate