Survey Of Economics
10th Edition
ISBN: 9781337111522
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 2, Problem 17SQ
To determine
Meaning of
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What are the usual steps in Benefit – Cost Analysis?
a) Try to figure out what result or conclusion you want, and then set the assumptions to make sure the analysis produces that result.
b) Identify the potential benefits and figure out a way to valuate them.
c) Identify the potential costs and valuate them.
d) Dismiss those benefits and costs to which you cannot assign a numerical value
e) Estimate the probability of each of the benefits and costs actually materializing or occurring.
f) Mulltiply the value of costs and benefits by their respective probabilities to arrive at the "mathematical expectation" or "mathematically expected" value.
g) For costs and benefits expected in the future, especially distant future, discount their value to the present time, using a "reasonable" discounting rate.
Toyota has started a major expansion of a Texas factory. It has already spent $11 million and has finished one building. It can finish the interior for an additional $6 million. The highest price it can get for the current unfinished building is $7 million. If Toyota’s estimated benefits of the building with the finished interior are $15 million, what should it do?
. a Complete the interior. The benefits of the finished building are greater than the $6 million costs of the building.
b Complete the interior. The benefits of the finished building are greater than the $7 million costs of the building.
c Complete the interior. The benefits of the finished building are greater than the $13 million costs of the building.
d Sell the building. The benefits of the finished building are less than the $17 million costs of the building. e Sell the building. The benefits of the finished building are less than the $24 million costs of the building.
Opportunity cost is best defined as
Select one:
a. the amount given up when choosing one activity over the next best alternative.
b. the amount given up when choosing one activity over all other alternatives.
c. the amount that is given up when choosing an activity that is not as good as the next best alternative
d. the opportunity to earn a profit that is greater than the one currently being made.
Chapter 2 Solutions
Survey Of Economics
Ch. 2.6 - Prob. 1YTECh. 2.7 - Prob. 1GECh. 2 - Prob. 1SQPCh. 2 - Prob. 2SQPCh. 2 - Prob. 3SQPCh. 2 - Prob. 4SQPCh. 2 - Prob. 5SQPCh. 2 - Prob. 6SQPCh. 2 - Prob. 7SQPCh. 2 - Prob. 8SQP
Ch. 2 - Prob. 9SQPCh. 2 - Prob. 10SQPCh. 2 - Prob. 11SQPCh. 2 - Prob. 12SQPCh. 2 - Prob. 1SQCh. 2 - Prob. 2SQCh. 2 - Prob. 3SQCh. 2 - Prob. 4SQCh. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - Prob. 8SQCh. 2 - Prob. 9SQCh. 2 - Prob. 10SQCh. 2 - Prob. 11SQCh. 2 - Prob. 12SQCh. 2 - Prob. 13SQCh. 2 - Prob. 14SQCh. 2 - Prob. 15SQCh. 2 - Prob. 16SQCh. 2 - Prob. 17SQCh. 2 - Prob. 18SQCh. 2 - Prob. 19SQCh. 2 - Prob. 20SQ
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