Cost-benefit analyses have been conducted of six proposed projects. None of these projects are mutually exclusive and the agency has a sufficient budget to fund those that will make society better off. The findings from the CBAs are summarized here in millions of dollars:

Group I consists of households with annual incomes over $15,000, while Group II consists of households with annual incomes under $15,000.
a. According to the net benefit rule, which of these projects should be funded?
b. For which of the projects might distributional considerations be an issue?
c. Compute internal distributional weights for the projects you selected in 2.b. Using these weights, indicate the circumstances under which each project might actually be undertaken.
d. Recompute social net benefits for the six projects using a distributional weight of 1 for Group I and a distributional weight of 2 for Group II. Using these weight- adjusted net social benefit estimates, indicate the circumstances under which each project might actually be undertaken. In doing this, assume that the distributional weight for Group II is an upper bound-that is, it probably overstates society€™s true generosity toward low-income households

Transcribed Image Text:

Net Social Net Group I Net Group II Befits fs enefits Project A S2 Project B Project C4 Project D 1 Project E Project F 2 $2 SO 12 E 2