Question 1

The term "present value" refers to the future value of present day money.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 2

Cost-benefit analysis is a relatively new tool developed and used first by NASA.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 3

Consider two projects.The first project pays benefits of $90 today and nothing else.The second project pays nothing today,nothing one year from now,but $100 two years from now.Which project would be preferred if the discount rate were 0%? What if the rate increased to 10%?

Accepted Answer

For a discount rate of 0%,the present va

Question 4

Why is it that projects that have negative net present values are sometimes undertaken?

Accepted Answer

Sometimes the influence of special inter

Question 5

When wages are viewed as benefits instead of costs of a project,it is an example of the

Accepted Answer

A)  labor game. 
B)  chain-reaction game. 
C)  double-counting game. 
D)  dating game. 
A)  labor game. 
B)  chain-reaction game. 
C)  double-counting game. 
D)  dating game.

Question 6

The U.S.government uses discount rates that lead to consistent outcomes.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 7

Risk is _________ a part of cost-benefit analysis.

Accepted Answer

A)  never 
B)  always 
C)  unable to be calculated 
D)  decided by others whether to be 
A)  never 
B)  always 
C)  unable to be calculated 
D)  decided by others whether to be

Question 8

Internal rate of return analysis suggest that a project should be undertaken if

Accepted Answer

A)  NPV > 0. 
B)  MB > 0. 
C)  IRR > discount rate. 
D)  discount rate > inflation rate. 
A)  NPV > 0. 
B)  MB > 0. 
C)  IRR > discount rate. 
D)  discount rate > inflation rate.

Question 9

Suppose in a certain city the demand for low-cost housing can be characterized by the equation P = 500 - 2Q,where Q is housing measured in square feet.Further,suppose that supply is characterized by the equation: P = 25 + 3Q.
(A)How much consumer surplus is there?
(B)Suppose that a grant is given so that the supply of housing is increased.This increase changes the supply curve to P = 3Q.How much does consumer surplus change because of the grant?

Accepted Answer

(A)Setting supply equal to demand gives

Question 10

When the benefit-cost ratio of a project is greater than 1,the project should be considered.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 11

The value that society places on consumption that is sacrificed in the present is called

Accepted Answer

A)  social marginal costs. 
B)  social marginal damages. 
C)  social rate of discount. 
D)  social returns. 
A)  social marginal costs. 
B)  social marginal damages. 
C)  social rate of discount. 
D)  social returns.

Question 12

Benefits of a project

Accepted Answer

A)  can change over time. 
B)  can be difficult to measure. 
C)  should be larger than costs. 
D)  are sometimes intangible. 
E)  all of these answer options are correct. 
A)  can change over time. 
B)  can be difficult to measure. 
C)  should be larger than costs. 
D)  are sometimes intangible. 
E)  all of these answer options are correct.

Question 13

What is the interest rate that should be used to ensure a total balance of $3,000 two years from now if you have a starting balance of $2,000?

Accepted Answer

The rate s

Question 14

The chain-reaction game

Accepted Answer

A)  was cancelled on network TV. 
B)  counts secondary benefits without counting secondary costs. 
C)  compounds a bad decision by making more bad decisions,causing unwanted projects to get funded. 
D)  is double-counting of benefits. 
A)  was cancelled on network TV. 
B)  counts secondary benefits without counting secondary costs. 
C)  compounds a bad decision by making more bad decisions,causing unwanted projects to get funded. 
D)  is double-counting of benefits.

Question 15

The government has hired you to advise them on the merits of a project that is being proposed.The project is expected to generate benefits of 14 million dollars today,5 million dollars in one year from today,and 1 million dollars in two years from today.(These are the only years of concern.)The project costs nothing today,but will cost 20 million dollars in two years.Assume the interest rate is 10%.If the benefit-cost ratio is greater than 1,the project should be allowed.What is your policy suggestion?

Accepted Answer

Benefit stream is 5M/1.1¹ + 1M/

The term "present value" refers to the future value of present day money.

Cost-benefit analysis is a relatively new tool developed and used first by NASA.

Consider two projects.The first project pays benefits of $90 today and nothing else.The second project pays nothing today,nothing one year from now,but $100 two years from now.Which project would be preferred if the discount rate were 0%? What if the rate increased to 10%?

Why is it that projects that have negative net present values are sometimes undertaken?

When wages are viewed as benefits instead of costs of a project,it is an example of the

The U.S.government uses discount rates that lead to consistent outcomes.

Risk is _________ a part of cost-benefit analysis.

Internal rate of return analysis suggest that a project should be undertaken if

When the benefit-cost ratio of a project is greater than 1,the project should be considered.

The value that society places on consumption that is sacrificed in the present is called

Benefits of a project

What is the interest rate that should be used to ensure a total balance of $3,000 two years from now if you have a starting balance of $2,000?

The chain-reaction game

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

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Exam 8: Cost-Benefit Analysis

The term "present value" refers to the future value of present day money.

Cost-benefit analysis is a relatively new tool developed and used first by NASA.

Consider two projects.The first project pays benefits of $90 today and nothing else.The second project pays nothing today,nothing one year from now,but $100 two years from now.Which project would be preferred if the discount rate were 0%? What if the rate increased to 10%?

Why is it that projects that have negative net present values are sometimes undertaken?

When wages are viewed as benefits instead of costs of a project,it is an example of the

The U.S.government uses discount rates that lead to consistent outcomes.

Risk is _________ a part of cost-benefit analysis.

Internal rate of return analysis suggest that a project should be undertaken if

When the benefit-cost ratio of a project is greater than 1,the project should be considered.

The value that society places on consumption that is sacrificed in the present is called

Benefits of a project

What is the interest rate that should be used to ensure a total balance of $3,000 two years from now if you have a starting balance of $2,000?

The chain-reaction game

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters