Week 2 Discussion Marginal Analysis 2

Week 2 Discussion Marginal Analysis 2 - were facing However...

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This article had a great example of what social costs are not taken into account when using cost/benefit analysis. When looking at a change in environmental regulations such as the production of paper for example, cost/benefit analysis may not include the cost vs. the benefit of the pollution the production will create. There is also the example of the Ford Pinto bursting into flames and killing people. Ford made the mistake of only looking using cost-benefit analysis in regards to money. They decided not to issue a recall due to the cost being higher than to simple settle the wrongful death lawsuits they
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Unformatted text preview: were facing. However, they did not realize the effect that the bad publicity would have on their sales and therefore money. I found several other examples, and almost all of them lead to the idea that CBA is usually used to figure out how to make the most money with minimal costs. Although it can be difficult to decide what parameters to use, companies should also include the costs to society when using cost-benefit analysis. Source: http://www.urban.org/toolkit/data-methods/cost-benefit.cfm http://en.wikipedia.org/wiki/Cost-benefit_analysis...
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This note was uploaded on 03/26/2012 for the course ECON GM545 taught by Professor Gotches during the Summer '11 term at Keller Graduate School of Management.

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