COST-BENEFIT ANALYSIS ECON CLASS

Reference - Boardman et al., Cost-benefit Analysis: Concepts and Practice. 4th Ed.

Exercise 3: Meta-analysis Rening raw gold ore to remove impurities and concentrate gold content usually involves caustic chemicals. One method involves dissolving the gold with a concentrated cyanide solution. The concentrations of cyanide used in this process are extremely dangerous, and if spilled into the environment, pose a signicant threat to wildlife and human health. A city has hire you to write a CBA for a Gold mine and processing facility bound to be to installed between the county limits. They promise to keep any cyanide solution in safe storage and dispose of it without any risk to the local population. Nevertheless, the city council wishes for you to analyze the possible impact of a spillover of the pollutant. You have gather all the relevant information that would allow you to carry out your analysis except for one, the shadow price for a kilogram of spilled cyanide solution. You don't have a proper budget to calculate this variable, luckily your research team has found four other analysis that computed the cyanide's shadow price. You make a list of similarities and differences between those analysis' cities and your city of interest: Study A Study B Study C Study D City of interest Shadow Price 96 of farming land (\"farm\") 50% Promty to closest c1ty [ llcm Populatlon of closest clty [ 700k (a) If your team decides to use only one of those studies' shadow price, which one would you choose? Why? {b} Imagine that your team decide to weight every study the same way (:1 each], what shadow price would you use? {(3) 1What's the mean and stande deviation for \"farm, prom and pop" [using all ve cities, four from the studies and the city of interest]? For the following part, dene the distance between the city in Study X and your city of interest as: ( farm: _ farmintsrest 2+ P703: _p70$interest 2+ P0173 _P0Pinterest 2 form 17703 PO\"? where 3 indicates the mean value of y. {d} Calculate the distance for each of the \"Study X\" cities and the city of inter est. Now, imagine that your team decide to weight every study based on the inverse of it's distance with the city of interest (Le. as a proportion of the sum of all the inverse of distance}, what shadow price would you use? {e} Given your answer on (d), do you believe such methodology applies too much importance to any of the three metrics (\"far-m, prom or pop\") over the others? Why