From the perspective of economists which statement is true: 1.) Benefits estimates for an environmental regulation that will reduce risks to human life probably should depend on the income levels of the people who will be affected by the regulation, despite political pressures to use the identical number for everyone, regardless of their income level. 2.)None of the other statements is correct. 3.) It is wrong to use willingness to pay as a measure of the benefits from a regulation to reduce environmental mortality risks. Rich people will be willing to pay more than poor people for the same reduction in risks. If the cost of the regulation is high, it is possible that the estimated net benefits from the project will be positive for a rich community but negative for a poor community, so only the rich community will get the protection. 4.) Suppose a specific type of environmental regulation, intended to reduce mortality risks, passes a benefit-cost test in the U.S. Then it will also have positive net benefits in developing countries, so they should adopt the same regulation. 5.) Consider an environmental regulation that has failed a benefit-cost test this year. If scientific estimates of the extent to which mortality risks will be reduced by a given environmental regulation do not change over time, the regulation will never pass a benefit-cost test, so we can just forget about it.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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From the perspective of economists which statement is true:

1.) Benefits estimates for an environmental regulation that will reduce risks to human life probably should depend on the income levels of the people who will be affected by the regulation, despite political pressures to use the identical number for everyone, regardless of their income level.

2.)None of the other statements is correct.

3.) It is wrong to use willingness to pay as a measure of the benefits from a regulation to reduce environmental mortality risks. Rich people will be willing to pay more than poor people for the same reduction in risks. If the cost of the regulation is high, it is possible that the estimated net benefits from the project will be positive for a rich community but negative for a poor community, so only the rich community will get the protection.

4.) Suppose a specific type of environmental regulation, intended to reduce mortality risks, passes a benefit-cost test in the U.S. Then it will also have positive net benefits in developing countries, so they should adopt the same regulation.

5.) Consider an environmental regulation that has failed a benefit-cost test this year. If scientific estimates of the extent to which mortality risks will be reduced by a given environmental regulation do not change over time, the regulation will never pass a benefit-cost test, so we can just forget about it.

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