1)

You are doing a cost benefit analysis of the costs and benefits of refurbishing abridge that is dangerous and needs repairs-how would you measure these costs and benefits. To maintain the bridge it 2 million dollars in materials, what is the cost of materials in the cost benefit analysis, choose the best answers.

I. If the supplier is in a competitive market the economic cost is much higher than 2 million, even if the accounting cost remains at 2 million

II. If the supplier is in a monopolistic market the economic costs are lower than 2 million (because monopolists have artificially high prices compared to the real cost of the resources)

III. In a competitive market the economic and accounting costs would be 2 million dollars.

2)

You are doing a cost benefit analysis of the costs and benefits of refurbishing abridge that is dangerous and needs repairs-how would you measure these costs and benefits. After the bridge is fixed, commuters will have 1000 hours of saved commuting time per year. (assume market wage rate is 21.00 dollars/hr). What is the benefit in the cost benefit analysis. Assume a long term interest rate of 7% so Present discounted value of 21,000 in perpetuity would be calculated as 21,000/.07=300,000 dollars.

I. Assuming the situation above the benefit would be $300,000 in a cost benefit analysis.

II. If the commuter is unemployed, the benefits would be something less than 21/hour because they would be willing to work for less and the cost of resources to society would be less.

III. In a competitive market the economic and accounting costs would be 2 million dollars.

3)

You are doing a cost benefit analysis of the costs and benefits of refurbishing abridge that is dangerous and needs repairs-how would you measure these costs and benefits. The construction workers spend money in the local economy having a multiplier effect of 80,000 dollars during construction

I. This is 80,000 in benefits

II. This 80,000 would have been in the economy anyway and is not part of the benefits

III. Benefits should be higher because of the positive spillover effects beyond 80,000

4)

You are doing a cost benefit analysis of the costs and benefits of refurbishing abridge that is dangerous and needs repairs-how would you measure these costs and benefits. The bridge maintenance will save one life per year, how should this be measured in a cost benefit analysis?

I. The value of a life is immeasurable and worth infinite amounts of money

II. The economists best guess is that society is willing to give up about 9.6 million to save a life so the benefit is 9.6 million

III. The economists best guess is that society is willing to give up about 9.6 million to save a life so the benefit is 9.6 million in perpetuity which would be 9.6/.07= $137,142,000