Economics 454
Spring 2016
Answers to Sixth Problem Set
I.
Suppose that a business owner is considering a possible investment. If state of
the world 1 (SOW1) occurs, the net benefit will be $50,000, bu
ECONOMICS 454
ANSWERS TO SECOND EXAM
SUMMER 2015
I.
Suppose that a proposed project has benefits per person of $50,000 with probability 0.4
and $0 with probability 0.6.
10
A. What is the expected mone
Economics 454
Spring 2016
Answers to First Problem Set
I.
Consider a society with three consumers, Smith, Jones, and Brown. The Social Marginal
Utility of Income (SMUY) is 1.1 for Smith, 0.6 for Jones
ECON 454 SP17
14.1
Lecture 14
Valuation of commodities for which there is no market data, continued
Travel cost method
Valuation of risks to life
The Value of a Statistical Life (VSL)
Definition
Trave
6.1
ECON 454 AU17
Lecture 6
Present value of consumption criterion, review
Capital markets and dynamic efficiency
Net present value formula
Accounting for inflation
Net present value decision rules
Nu
2.1
ECON 454 SP17
Lecture 2
Social welfare criterion, continued
Pareto criterion
Potential compensation criterion
Summary
Aggregation over commodities
Valuation principles
Social welfare criterion
As
ECON 454 SP17
1.1
Lecture 1
Introduction
Benefit-cost analysis as four-way aggregation
Standing
Social welfare
Introduction
Page 1 of the syllabus reviews the course requirements. There will be two no
5.1
ECON 454 SP17
Lecture 5
Aggregation over Time
Basic principles
Rate of time preference
Opportunity cost rate
Dynamic efficiency
Present value of consumption criterion
Aggregation over Time
Public
ECON 454 AU16
15.1
Lecture 15
Estimation of the value of a statistical life, continued
Stated preference
Hedonic estimation
Compensating wage differentials
Factors affecting VSL
Attitude toward risk
I
9.1
ECON 454 AU16
Lecture 9
Risk aversion
Expected utility
Applications
Critiques of expected utility theory
Risk aversion
When the outcomes of projects are not correlated with other sources of income
12.1
ECON 454 AU16
Lecture 12
Aggregation methods not using explicit distributional weights
Disaggregation by income level
Pareto approach
Quasi-Pareto approach
Social welfare dominance approach
Summa
13.1
ECON 454 AU16
Lecture 13
Valuation of commodities with incomplete market data
Use of market data for similar commodities
Hedonic technique
Cost of alternative supply
Valuation of commodities for
ECON 454 AU16
11.1
Lecture 11
Aggregation over Individuals
Introduction
Methods using explicit distributional weights
Potential compensation formula
Relation to social welfare formula
Rationales for u
ECON 454 AU16
10.1
Lecture 10
Use of EMV as approximation of CE
Degree of risk aversion
Degree of uncertainty
Size of outcomes relative to income
Outcomes correlated with income
Summary of EMV as appr
12.1
ECON 454 SP17
Lecture 12
Feldsteins constant elasticity formula, continued
Harbergers alternative cost approach
Aggregation methods not using explicit distributional weights
Disaggregation by inc
ECON 454 SP17
15.1
Lecture 15
Estimation of the value of a statistical life
Stated preference
Hedonic estimation
Compensating wage differentials
Factors affecting VSL
Attitude toward risk
Income
Age
R
7.1
ECON 454 SP17
Lecture 7
Special cases of discounting formulas, continued
Annuity
Annualized value
Alternative project decision rules
Benefit-cost ratio
Internal rate of return
Rationales for using
Economics 454
Second Problem Set
Spring 2017
Due April 10th
I.
Suppose that the BPA is considering a project that would increase the supply of
electricity in the Pacific Northwest. Assume that the mar
Economics 454
Third Problem Set
Spring 2017
Due April 17th
I.
A. What is the definition of dynamic efficiency? (A one-sentence answer is sufficient).
B. Explain why perfectly competitive markets could
Economics 454
Problem Set 1
Spring 2017
Due April 3rd
I.
Standing is an important issue that does not receive much discussion in benefit-cost analyses.
A. Briefly explain what is meant by standing.
B.
ECON 454
Autumn 2017
Answers to First Quiz
I. The social welfare function incorporates a number of strong value judgments. Describe any
two of them.
It is utilitarian because it is a function only of
ECONOMICS 454
ANSWERS TO MID-TERM EXAM
SPRING 2017
I. In class we discussed several alternative criteria for evaluating whether a public project is
desirable.
A. The social welfare criterion is
20
P
ECONOMICS 454
ANSWERS TO MIDTERM EXAM
SUMMER 2015
1. Consider a society with two consumers, Smith and Jones. The Social Marginal Utility of
Income (SMUY) is 1.0 for Smith and 0.5 for Jones.
10 A. Who
ECON 454 AU17
1.1
Lecture 1
Introduction
Course requirements
Benefit-cost analysis as four-way aggregation
Standing
Social welfare
In this course, we will discuss how benefit-cost analysis should be d
9.1
ECON 454 SP17
Lecture 9
Expected utility
Utility Function
Applications
Most individuals would prefer an amount of money received for certain to an
uncertain prospect having the same expected monet
8.1
ECON 454 SP17
Lecture 8
Alternative project decision rules, continued
Rationales for using the alternative rules
Implications of dynamic inefficiency
Sources of dynamic inefficiency
Social value o
10.1
ECON 454 SP17
Lecture 10
Use of EMV as approximation of CE
Degree of risk aversion
Degree of uncertainty
Size of outcomes relative to income
Outcomes correlated with income
Methods actually used