Assignment 4 - Public finance

Assignment 4 - Public finance - 11) The OMBs use the...

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Jennifer Edwards Public Finance Prof. Dunbar November 19, 2009 2) The opportunity cost is calculated as the resource cost of producing the input and in a competitive market, the price will equal the marginal resource cost. In a monopolistic market, the price will be greater than marginal cost. The opportunity cost, and the figure used in a cost benefit calculation, should be the marginal cost. The additional price paid is a surplus to the selling firm, so it is a transfer, not a net benefit or cost.
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Unformatted text preview: 11) The OMBs use the historic pretax private investment return for public investments recognizes its competition by trying to keep the rates competitive. The opportunity cost of public borrowing is private borrowing, and these rates should be similar. The cost of government borrowing may be a better measure of the discounted value of an asset, because an asset is purchased with current money and is expected to yield a stream of benefits over time....
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This note was uploaded on 09/22/2011 for the course ECONOMICS 6311 taught by Professor Segerson during the Spring '10 term at UConn.

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