Clinton Administration

Clinton Administration - present value of the highway’s...

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Jerry Imel Economics 301 Intermediate Moment #7 03/03/2011 Clinton Administration The Clinton administration felt that if they stopped building a highway that had already been started, Americans would be better-off. First, let’s look at the sunk costs involved in this matter. The government spent $7 billion that they will not be able to recover. If they reacted solely on this basis, then their decision making lacked rationale. In this case; however, it appears that the Clinton administration is saying that the
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Unformatted text preview: present value of the highway’s benefits to the country is $25 billion. It is implied that spending an additional $22 billion on the highway will have no added value to the country. Therefore, if the Clinton administration decided to spend the additional $22 billion on the highway, it would be a total cost of $29 billion. The $29 billion put in to the project minus the $25 billion value of the project, would leave Americans $4 billion worse off....
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