EC455_555_Assignment1 (1)

ECON 455W/555 - Assignment 1 Due Friday, January 19, 11:59pm You may work with others but you must submit your OWN work. Please submit your an- swers on a separate sheet of paper. Analytical Portion: 1. (5 points) The Army Corps of Engineers has proposals for building six dams, with benefits and costs (in millions of dollars) listed as follows: Dam Benefits Costs 1 40 20 2 30 10 3 30 20 4 10 20 5 15 10 6 15 20 a. Compute the net benefits and the benefit-cost ratio for each dam. b. Based on this, which dams should be built? What is the cost of building these dams? Explain your reasoning. c. If the budget is limited to $ 20 million, which dams should be built? Explain your reasoning. d. If dams 3 through 6 are substitutes (all in the same river basin), which one should we build? Explain your reasoning. 2. (5 points) Three mutually exclusive projects are being considered for a remote river valley: Project R, a recreational facility, has estimated benefits of $ 20 million and costs of $ 16 million; Project F, a forest preserve, has estimated benefits of $ 26 million and costs of $ 20 million; Project W, a wilderness area, has estimated benefits of $ 10 million and costs of $ 2 million. In addition, a road could be built for a cost of $ 8 million that would increase the benefits of project R by $ 16 million, project F by $ 10 million, and project W by $ 2 million. In the absence of any other projects, the road alone has estimated benefits of $ 4 million. a. Calculate the net benefits and benefit-cost ratio for each alternative to the status quo. (Hint: there are seven). b. If only one of the seven alternatives can be selected, which do you recommend? Explain your reasoning. Writing Portion: (15 points) Read: Regulatory Impact Analysis for the Proposed Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units (Note: you do not need to read this entire report. The necessary information is contained in the executive summary and introduction, but feel free to read other sections if you want more details.) Link to paper here! Using Boardman’s ”10 Steps to CBA” from Chapter 1, identify and briefly discuss each step used in the analysis. Note if a step is not included, and highlight any incomplete, controversial, or omitted elements of the CBA. Please limit your response to roughly 1 page–please use complete sentences in your response (no bulleted lists).