4. Assume that sea-levels are rising due to climate change. Florida is a state with many ocean-front properties. Suppose that the state of Florida decides to build an ocean-wall to protect water-front properties along the east coast of the state. This wall would, however, leave the ocean-front properties on the west coast of the state vulnerable to rising sea- levels. Policy makers are interested in estimating the dollar value of the benefits associated with this policy/project. Explain how capitalization could be used to estimate the benefits associated with the policy.

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Chapter1: Making Economics Decisions
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4. Assume that sea-levels are rising due to climate change. Florida is a state with many
ocean-front properties. Suppose that the state of Florida decides to build an ocean-wall to
protect water-front properties along the east coast of the state. This wall would, however,
leave the ocean-front properties on the west coast of the state vulnerable to rising sea-
levels.
Policy makers are interested in estimating the dollar value of the benefits associated with
this policy/project. Explain how capitalization could be used to estimate the benefits
associated with the policy.
Transcribed Image Text:4. Assume that sea-levels are rising due to climate change. Florida is a state with many ocean-front properties. Suppose that the state of Florida decides to build an ocean-wall to protect water-front properties along the east coast of the state. This wall would, however, leave the ocean-front properties on the west coast of the state vulnerable to rising sea- levels. Policy makers are interested in estimating the dollar value of the benefits associated with this policy/project. Explain how capitalization could be used to estimate the benefits associated with the policy.
Expert Solution
Step 1: Define Capitalization

In economics, capitalization alludes to the most common way of deciding the present value of an asset or an income stream, regularly by changing over future cash flows into their current value. This idea is utilized in different economic settings, including real estate, finance, and investment examination.

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