Assume that the government now has a choice between undertaking the project described in problem 1 and
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Assume that the government now has a choice between undertaking the project described in problem 1 and undertaking a larger project. If it spends an additional $100,000, returns will be increased by $25,000 per year and disposal costs in the final year will increase by $20,000. Which project should be undertaken if the discount rate is 0? 10 percent? 15 percent? If there are two groups in the population, how are your answers affected if two-thirds of the incremental benefits go to the poor (with the incremental costs being shared equally, as before)?
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Economics Of The Public Sector
ISBN: 9780393925227
4th Edition
Authors: Joseph E. Stiglitz, Jay K. Rosengard
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