1. KRRF is considering the removal of four hydroelectric dams along the lower Klamath river in Southern Oregon and Northern California. The hope is to improve the spawning and survival of fish species protected under the Endangered Species Act. Theyve brought you on to help them decide on the economically efficient dam removal strategy. Note that dams can only be removed in whole numbers (i.e. you cant remove half a dam), and these are the only four dams being considered for removal.

Dams Removed	total Costs(million$)	Marginal Costs	Total Benefits	Marginal Benefits	Total Net Benefits
1	400			1100
2		450	2100
3	1420			900
4	2000			710

1.1 The information youve received from KRRF has some missing information. Fill out the table above with the correct information.

1.2 You notice that the marginal costs and benefits do not have units next to them. What are the proper units in this case?

1.3 Is there an economically efficient number of dams to remove? If so, how many? and why?

1.4 Now, KRRF decides to bring in Eco for Good; another non-profit, to make a full ecological assessment on the condition of the fish species near the dam. Eco for Good concludes their evaluation and inform KRRF that the dam removal will help restablish the fish habitat but this may not happen immediately. According to Eco for Goods estimates,the benefits from this project will not be felt for another 12 years. Based on this information fill in the table below using a 4% discount rate. (0.5 pt each open slot - 4pts)

1 2 3 4

3.5 Based on the tables above, what is the dynamically efficient number of dams to remove? Why? (3pts)

Dams Removed	NPV of Total Benefits (millions $)	NPV of Total Net Benefits (millions $)
1
2
3
4

1.6 KRRFs director has asked you to increase the discount rate. How might this affect your analysis - would a much higher discount rate lead you to recommend removing more or fewer dams than you had previously recommended? Explain. (3 pts)