Deck 6: Frameworks of Analysis

Question 1

One limitation of cost-effectiveness analysis is that other techniques that could be more cost-effective are not considered because their costs are too difficult to measure.
Cost-effectiveness analysis could omit lower cost possibilities if it does not include options with hard to measure costs.

Answer 1

True

Question 2

List three criticisms that have been made about benefit-cost analysis.

Answer 2

The three criticisms that have been made of benefit cost analysis include:1)public agencies use benefit-cost analysis to justify increasing their budgets;2)benefit-cost analysis is used to limit political discussion and decision-making about prospective public projects and programs;and 3)benefit-cost analysis is a way of limiting spending on public programs because of the difficulty of measuring benefits relative to costs.

Question 3

An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people.

A)proportional;less
B)proportional;the same
C)proportional;greater
D)progressive;the same

Answer 3

B

Question 4

An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people.

A)proportional;less
B)regressive;greater
C)regressive;the same
D)regressive;less

Question 5

Benefit-cost analysis incorporates ________ valuation of all inputs and outputs related to the project whether or not they are transacted in private markets.

A)market
B)private
C)social
D)non-market

Question 6

When it is difficult to estimate the future benefits of a project,cost-effectiveness analysis is an alternative approach to conducting a full-benefit cost analysis.

Question 7

When it comes to determining the appropriate environmental project to select,the ________ link(s)benefit-cost analysis to our theoretical model of the economics of the environment.

A)equimarginal principle
B)socially efficient scale
C)social discount rate
D)economies of scale

Question 8

Briefly describe the essential steps in conducting a benefit-cost analysis of a project.

Question 9

If two projects with uncertain outcomes had the same expected value,but project A had two similar but uncertain outcomes with similar probabilities of occurrence while project B had a low probability of a disaster and a high probability of a positive outcome a ________ decision maker would choose Project A.

A)risk-neutral
B)risk-loving
C)risk-averse
D)perfectly informed

Question 10

The social discount rate is similar to the private discount rate except it incorporates a social rate of time preference that reflects the government's cost of borrowing which is typically lower than that of the private sector.

Question 11

Vertical equity treats people in the same circumstances identically.
Horizontal equity treats people in the same circumstances identically.

Question 12

Benefit-cost analysis is very well suited to the analysis of projects with potentially large long-run impacts on the environment.
Because of the potentially large impact on future generations,it is difficult to determine the appropriate discount rate for benefit-cost analysis so instead,we may wish to avoid projects that reduce the long-run productive capabilities of our natural and environmental resource base,as well as avoiding making decisions that are irreversible,or that preclude taking other options in the future.

Question 13

A cost-effective project is the one that achieves a given level of benefits at the lowest cost among all the possible project options.

Question 14

If the MAC = 60 - 0.25E and MDC = 0.5E the socially efficient scale is equal to ________ units of emissions.

A)240
B)80
C)45
D)160

Question 15

The socially efficient scale maximizes the net social benefits from a project.
Net social benefits are maximized where MAC = MDC.

Question 16

Given the information in the following table,________ is the cost-effective way to reduce the phosphorous concentration in the Bay of Quinte. $$\begin{array} { | l | c | } \hline \text { Strategy } & \begin{array} { c } \text { Cost (\$ thousands) per microgram/ } \\\text { litre reduction in phosphorus }\end{array} \\\hline \begin{array} { l } \text { Reduction in phosphorus inputs from agricultural } \\\text { runoff }\end{array} & 2,033 \\\hline \text { Alum treatment of sediments in the bay } & 2,000 \\\hline \begin{array} { l } \text { Treatment of wastewater from water treatment } \\\text { plants }\end{array} & 98 \\\hline \text { Tertiary treatment at sewage treatment plants } & 1,078 \\\hline\end{array}$$

A)reduction in phosphorus inputs from agricultural runoff
B)alum treatment of sediments in the bay
C)tertiary treatment at sewage treatment plants
D)treatment of wastewater from water treatment plants

Question 17

An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people.

A)progressive;less
B)regressive;greater
C)progressive;greater
D)progressive;the same

Question 18

In Canada,benefit-cost analysis has been officially legislated for use by federal government agencies.
In Canada benefit-cost analysis has not been officially legislated for use by either federal or provincial government agencies,but it has been used extensively in the United States.

Question 19

Benefit-cost analysis has been criticized as a means of allowing public agencies to justify ever-larger budgets.

Question 20

If the MAC = 400 - 2E and MDC = 6E the socially efficient scale is equal to ________ units of emissions.

A)200
B)150
C)100
D)50

Question 21

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 5%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 5% taking into consideration the uncertainty about population growth.Assume the probability of zero population growth is 25% while the probability of higher population growth is 75%.What option do you recommend and why?

Question 22

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 2%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 2%.What option do you recommend and why?

Question 23

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 5%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 5%.What option do you recommend and why?

Question 24

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 5%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 5% taking into consideration the uncertainty about population growth.Assume the probability of zero population growth is 50% while the probability of higher population growth is 50%.What option do you recommend and why?
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Question 25

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 10%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 10%.What option do you recommend and why?

Question 26

Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 5%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 5% taking into consideration the uncertainty about population growth.Assume the probability of zero population growth is 75% while the probability of higher population growth is 25%.What option do you recommend and why?