1. (15 points). The City of Bemidji is considering a program to hire someone to pick up trash along the lakeshore in the city limits. The program will cost $200,000 today for equipment, and $40,000 annually to pay the Trash Master (that's the official job description). Bemidji mayor Jorge Prince has asked me to hire an intern to conduct a Benefit Cost Analysis to determine if this program is efficient. You are that intern You have 3 pieces of information to help you determine benefits. (A) The city conducted a contingent valuation survey of 100 randomly selected residents and found that on average people are willing to pay $10 per year in higher sales taxes for this service. (B) A bedonic survey in the twin cities of Ironwood, Michigan (which has a full-time Trashmaster) and Hurley, Wisconsin (which does not) found that, on average, houses sold for $1000 more in Ironwood than in Hurley once all other variables are accounted for (20 variables were included, such as sq feet, bedrooms, bathrooms, proximity to schools, fireplaces, etc) This study sampled an average of 100 homes sold each year over a 3-year period (500 homes are sold annually in Bemidji) (C) Finally, each shoreline property owner can hire someone to collect trash for their own land. The annual cost of this service is $500. Out of 12,000 Bemidji residents, the city estimates that 5 of them had hired a private Trash-Master. (1) Estimate the annual benefits of this program 3 ways using contingent valuation, hedonics, and avoidance expenditures. (2) Then conduct a Benefit-Cost Analysis for this project over the next 5 years with today's costs happening in year 0 and benefits beginning in year 1), using a 4 % discount rate. Which method(s) of estimating benefits will you use? Are there any of the 3 methods that are inappropriate to this task? If so, why? 15 anten ing selle vear West Centennial is in an aspen 1. (15 points). The City of Bemidji is considering a program to hire someone to pick up trash along the lakeshore in the city limits. The program will cost $200,000 today for equipment, and $40,000 annually to pay the Trash Master (that's the official job description). Bemidji mayor Jorge Prince has asked me to hire an intern to conduct a Benefit Cost Analysis to determine if this program is efficient. You are that intern You have 3 pieces of information to help you determine benefits. (A) The city conducted a contingent valuation survey of 100 randomly selected residents and found that on average people are willing to pay $10 per year in higher sales taxes for this service. (B) A bedonic survey in the twin cities of Ironwood, Michigan (which has a full-time Trashmaster) and Hurley, Wisconsin (which does not) found that, on average, houses sold for $1000 more in Ironwood than in Hurley once all other variables are accounted for (20 variables were included, such as sq feet, bedrooms, bathrooms, proximity to schools, fireplaces, etc) This study sampled an average of 100 homes sold each year over a 3-year period (500 homes are sold annually in Bemidji) (C) Finally, each shoreline property owner can hire someone to collect trash for their own land. The annual cost of this service is $500. Out of 12,000 Bemidji residents, the city estimates that 5 of them had hired a private Trash-Master. (1) Estimate the annual benefits of this program 3 ways using contingent valuation, hedonics, and avoidance expenditures. (2) Then conduct a Benefit-Cost Analysis for this project over the next 5 years with today's costs happening in year 0 and benefits beginning in year 1), using a 4 % discount rate. Which method(s) of estimating benefits will you use? Are there any of the 3 methods that are inappropriate to this task? If so, why? 15 anten ing selle vear West Centennial is in an aspen
