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Refining raw gold ore to remove impurities and concentrate gold content usually involves caustic chemicals. One method involves dissolving the gold with a concentrated cyanide

Refining 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 significant threat to wildlife and human health.

A city has hire you to 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 B C D city of interest

shadow price 100 400 500 3000 -

%of farming land ("farm") 5% 80% 30% 70% 50%

proximity to closest city ("prox") 200km 100km 150 50 150

population of closest city ("pop") 50k 10k 800k 300k 700k

  1. Calculate the distance for each of the "Study X" cities and the city of interest. Now, imagine that your team decide to weight every study based on the inverse of it's distance with the city of interest (i.e. as a proportion of the sum of all the inverse of distance), what shadow price would you use?
  2. Given your answer on (Q1), do you believe such methodology applies too much importance to any of the three metrics ("farm, prox or pop") over the others? Why?

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