Chapter+8 - Chapter8 CostBenefitAnalysis Measuring the...

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Chapter 8 Cost Benefit Analysis
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Measuring the Costs of Public Projects The Example
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Measuring the Costs of Public Projects Measuring Current Costs cash-flow accounting :Accounting method that calculates costs solely by adding up what the government pays for inputs to a project, and calculates benefits solely by adding up income or government revenues generated by the project. opportunity cost :The social marginal cost of any resource is the value of that resource in its next best use.
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Measuring the Costs of Public Projects Measuring Current Costs Imperfect Markets Rents: Payments to resource deliverers that exceed those necessary to employ the resource. Economic costs are only those costs associated with diverting the resource from its next best use.
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Measuring the Costs of Public Projects Measuring Future Costs present discounted value ( PDV ) : A dollar next year is worth 1 + r times less than a dollar now because the dollar could earn r % interest if invested. social discount rate :The appropriate value of r to use in computing PDV for social investments.
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Measuring the Costs of Public Projects Measuring Future Costs
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Measuring the Benefits of Public Projects Valuing Driving Time Saved Using Market-Based Measures to Value Time: Wages Suppose we can show that the time that individuals save from driving faster is spent at work. This theoretical proposition runs into some problems in practice: h Individuals can’t freely trade off leisure and hours of work; jobs may come with hours restrictions. h
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This note was uploaded on 04/13/2010 for the course ECON 330 taught by Professor Minetti during the Fall '08 term at Michigan State University.

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Chapter+8 - Chapter8 CostBenefitAnalysis Measuring the...

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