There is some debate about whether secondary benefits should be considered when assessing public policy proposals. Identify two reasons why secondary benefits might be excluded from a benefit-cost analysis of proposed environmental policy.
What will be an ideal response?
Among the possible reasons are:
• From a practical perspective, data for some secondary benefits, such as increased worker productivity, may be unavailable, incomplete, or difficult to measure, any of which can cause bias.
• Some secondary benefits may be difficult to attribute solely to environmental policy, such as increased demand for labor inputs to carry out that policy.
• Indirect gains in one market can be offset as losses in another, which means that excluding them might be justifiable.
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Refer to the graph shown, which shows the demand and supply for a new vaccine against the common cold. Suppose once vaccinated, a person cannot catch a cold or give a cold to someone else. At the competitively determined output level, the marginal social benefit will be:
A. less than P0. B. equal to P0. C. greater than P0. D. greater than or less than P0 depending on the income elasticity of demand and the effectiveness of the vaccine.
The income velocity of money is
A. the time it takes for monetary policy to have an effect on world financial markets. B. the time lag from when the Fed decides to increase the money supply until the effect takes place. C. the number of times per year a dollar is spent on final goods and services. D. the time it takes to produce money.
Consumers ________ from a tariff because they pay a ________ price to producers so they purchase a ________ quantity of the good
A) lose; lower; smaller B) win; lower; larger C) win; higher; smaller D) lose; higher; smaller E) lose; higher; larger
If a perfectly competitive firm finds that price is less than its ATC, then the firm
A) will raise its price to increase its economic profit. B) will lower its price to increase its economic profit. C) is making an economic profit. D) is incurring an economic loss. E) is making zero economic profit.