1. Assume that a particular plot of land could be developed as (1) residential housing, (2) an industrial park, or (3) a factory outlet mall. Also assume there is a passable road adjoining the property and that the property is about half a mile from a major highway. Only one alternative at most can ultimately be approved.

Rank these choices in terms of their (a) net benefits, and choose the one that places first. Then calculate the (b) benefit/cost ratio. Note that the benefit/cost ratios for the industrial park and the outlet mall are not consistent with the net benefit ranking.

	Housing	Industrial Park	Outlet Mall	Vacant lot
Benefit	$1,000,000	$1,250,000	$1,600,000	$1,000
Cost	$1,100,000	$900,000	$1,200,000	$1,000
Net benefit
B/C ratio

Assume that you have plenty of available lands but only $3 million to spend. Choose the projects from the following table that should be approved within the $3 million budget. Then verify that these projects provide the greatest total net benefits. Does choosing the power plant (which is within budget) maximize total net benefits?

	Housing	Industrial Park	Outlet mall	Golf course	Power plant	Vacant lot
Benefit	$1,000,000	1,250,000	$1,600,000	$1,500,000	$4,200,000	$1,000
Cost	$1,100,000	$900,000	$1,200,000	$900,000	$3,000,000	$1,000
B/C ratio
Net benefit