1. Chapter I (Page 2) talks about the early American Heroes as well as the modern day American heroes as proponents of the cost-benefit analysis. Name a famous American who you believed used the cost-benefit analysis in making important decisions. Briefly introduce the person and describe the decisions they made and how this type of analysis made for better outcomes.
2. Chapter 1(Page 3) states that most of the focus of the chapter is public policy decision making using cost-benefit analysis. Think of a U.S Government (local, regional or national) Public policy that was created by the use of cost-benefit analysis. Describe this policy and how it has been made for effective or efficient by the use of this type of analysis.
3. From chapter 3 define the welfare economics tradition, Pareto’s rule, the micro economic tradition. The public choice tradition and the fundamental principle of benefit-cost analysis. How are these issues useful to the decision makers?
4. Define consumer surplus. Producer surpluses, deadweight loss, income effects, substitution effects, and explain how these factors can impact the cost benefit analysis. Also explain how these factors can impact the cost benefit analysis when markets do not exist.
5. Chapter 6 points out many important issues to consider in cost-benefit analysis. Explain why it is important to take into account these issues if they are applicable in the analysis, comparing the present values, discounting, inflation, risk, internal, rates of return and the social rate time of preference.
6. Chapter 7 discusses the fact that there are clear gainers and losers in cost-benefit decisions and that sometimes a strict efficiency standard should be used to make the decisions. In some cases it is appropriate to weigh some gains and losses, and sometimes people outside the company area, region, and jurisdiction of interests are impacted as well. Also, in other cases, inefficiencies will be tolerated for the sake of a larger purpose or equity reasons, consider the minimum wage in the United states today. Use these issues and others if appropriate from the chapter to suggest a solution to the minimum wage challenge in the United States.
7. Chapter eight discusses the importance of good decision making when physical investments are large and there are long run environmental costs to a project. In the case of long-term projects, benefits and costs often change over time and this fact has to be taken into considerations in the benefit costs analysis. Think of a long term project that you are familiar with; do not use the Tellico dam from the chapter. Discuss how benefit-cost analysis was used and how the decisions incorporated these and other issues mentioned in the chapter.