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3. (30 points, as indicated) Table 1 below shows the benefits and costs used in analyzing the revised Lead Ruling to determine the benefits and
3. (30 points, as indicated) Table 1 below shows the benefits and costs used in analyzing the revised "Lead Ruling" to determine the benefits and costs of tightening the USA's lead standard from 1.1 grams to 0.1 grams of lead per leaded gallon of gasoline. Table 1 Monetized Benefits and Costs of Reducing Lead in Gasoline (millions of 1983 dollars) 1985 1986 1987 1988 1989 1990 1991 1992 Monetized Benefits Children 223 600 547 502 453 414 369 358 health effects Adult blood 1,724 5,897 5,675 5,447 5,187 4,966 4,682 4,692 pressure Conventional 0 222 222 224 226 230 239 248 pollutants Vehicle 102 914 859 818 788 767 754 749 Maintenance Fuel 34 187 170 113 134 139 172 164 Economy TOTAL 2,084 7,821 7,474 7,105 6, 788 6,517 6,216 6,211 Monetized Costs TOTAL 96 608 558 532 504 471 444 441 Net Benefits 1,988 7,213 6,916 6,573 6,284 6,045 5, 772 5,770 Net Benefits excluding Adult Blood 264 1,316 1,241 1,125 1,096 1,079 1,090 1,079 Pressure b. (10 points) Suppose a 0 percent instead of 10 at the IPA An changed if the EPA hall how the provera val discuss intuitively, you do not need to calculate the no Name will become more an10%% = 0. 1 6 a. (20 points) Using the "conservative" estimate that excludes blood pressure, write an equation to find the present value of the net benefits over the time period 1985-1992 (since you do not have a calculator, I do not expect you to compute the exact value). Assume the real social discount rate is 10 percent and let 1985 be the first period, e.g., at t = 1. Show all work and discuss your steps. Then discuss whether the EPA's proposed policy is "feasible." 5770-1988 3782 0,000 = (lol ) 8 1,000 60.00 70,000 at benefits illustrate 'horizontal e megha of horizontal equity and vo version, state any needed The EPA's proposed policy, if the policy is acceptable or not unacceptable, then it is feasible. feasible IF PV 20 00 080 Erson C b. (10 points) Suppose a "renegade" economist at the EPA says the social discount rate should be 0 percent instead of 10 percent. Discuss how the present value of the net benefits would have changed if the EPA had used a real social discount rate of 0 percent instead of 10 percent. Just discuss intuitively, you do not need to calculate the net present value. The present value will become more and more small if O percent instead of 10 percent. the opposite
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