Basics Of Engineering Economy
2nd Edition
ISBN: 9780073376356
Author: Leland Blank, Anthony Tarquin
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Due to limited funding and the scope of the work, the restoration of Kaho'olawe is heavily
dependant on the work of volunteers. Although the number of individuals who volunteer is
plentiful, only a small number can travel to Kaho'olawe every year. A critical preparation is
that they must go through training with the Kahoolawe Island Reserve Commission (KIRC)
before they travel. Usually there are about two trips to the island every month, with each
trip typically spanning a few days.
1. Table 1 provides an overview of service trips to Kaho'olawe for four fiscal years
Fiscal Year Number of Volunteers Service Trips
792
657
660
15
36
29
28
16
17
19
783
33
Table 1: Numbers of yearly service trips and volunteers.
(a) Use table 1 to find the average number of individuals who went to Kaho'olawe
during each service trip for each individual year.
(b) Use your answers to (a) to find the overall average of volunteers per trip.
Sandra and Mary live next to each other. Sandra has a dog that she walks
every day. Sandra has to walk past Mary's front lawn and her dog always pees
on Mary's flowers, which causes them to eventually die. Mary will move in a
few months but, until then, she estimates she will spend $100 on flowers to
replace the ones that die as a result of the daily visits from Sandra's dog. The
only solution to this problem is a $50 fence that can be put around Mary's
flowers that will protect them from Sandra's dog.
a. What term do economists use for the consequences of Sandra's daily walks
in this setting?
b. Is it socially optimal to have the fence put around the flowers in this case?
Why or why not?
c. What does the Coase theorem say about how the social optimum could be
achieved? Explain what an agreement between Sandra and Mary would look
like if Mary has the right to not be bothered by her neighbour's dog.
The state government has passed a regulation requiring that individual sources install
filters to capture emissions of inhalable particles. The regulation will require the that
installation of the filters start within the upcoming year. The rule is expected to provide
improved respiratory health outcomes for the state's citizens. The benefits and costs
(shown in the table below) of the rule will be reckoned at the end of each of the next 12
years. The government has analyzed the costs and benefits of the regulation at an annual
discount rate of 3%. Determine the annual and total net benefits of the project for each
year of the 12 year period, and the net present value of the completed project, as
determined in the EPA's current cost-benefit evaluation of the project..
1
2
3
4
5
6
7
8
9
10
11
12
Benefits
51,278
45,367
52,876
62,448
53,749
39,723
41,804
46,735
44,286
37,873
51,244
47,836
Costs
43,956
32,556
29,864
39,874
36,843
29287
48,536
52,467
36,118
35,122
39,204
41,344
Chapter 7 Solutions
Basics Of Engineering Economy
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