Exam 10: Public Sector Decision Making

A city council is planning to build a new bridge across a creek. This will require an immediate expenditure of $50 000, but will save citizens an estimated $5 000 in travel costs every year over the next twenty years. If the council's MARR is 5%, what is the BCR for the project?

A study shows that widening a road shoulder by 0.3 metres results in a 10% decrease in fatal traffic accidents. Trying to improve the road safety of the Provincial part of a federal highway, a Provincial Department of Transportation widened the highway shoulders by 0.9 metres. Based on the data provided by the Transportation Safety Board (1997)in the table below, calculate the fatal accident cost savings that resulted from this project. Assume that the Provincial Department of Transportation used to record 10 fatalities on average per year on this part of the highway.

When choosing the appropriate interest rate to evaluate a public project, which of the following should be used?

The conventional benefit-cost ratio of a public project reflects

Suppose that as a result of a public project evaluation the following information was obtained:- PW of the project's capital costs = $9 million- PW of the project's operating costs = $5 million- PW of the project's benefits = $20 millionWhat is the BCRM for this project?

A city council is planning to build a new bridge across a creek. This will require an immediate expenditure of $50 000, and an estimated $2 000 a year in maintenance, but will save citizens an estimated $5 000 in travel costs every year over the next twenty years. If the council's MARR is 5%, what is the BCR for the project?

Suppose there are two mutually exclusive public alternatives A and B. They are characterized by the following data: Alternative A: First cost = 10 million Annual benefits = $2 million Annual operating costs =$1 million Alternative B: First cost = $15 million Annual benefits = $3.5 million Annual operating costs = $1 million Both alternatives have a 10-year service life. Social discount rate is 7%. Which alternative should be chosen on the basis of the conventional BCR?

Total benefits of a public project to a society

What is a market failure and why is this concept so important in public decision-making?