ARE 220 Test 2 quiz3 questions
contingent valuation methods (CVM), Travel Cost Methods (TCM) and Hedonic Pricing Methods are all
Demand curve approaches
The present value of net benefits (PVNB) is
Found as (PVB - PVC)
The present value of $525 received one year from today, assuming an annual rate of return (discount rate) of 5% is
$500
If the value of an environmental benefit realized two years from today is $970.20, and the annual rate of return is 5 percent, then its present discounted value is
$880
If PVB/PVC for a given policy option equals 5.5, this means that
- - for every dollar of incremental costs incurred by society, there are $5.50 in realized incremental benefits. - the policy option is feasible. both (b) and (c) are correct.
Averting costs as a method for estimating nonmarket values could include the
- cost of installing a home water purification system. - the cost of sunscreen to avoid the effects of less ozone. - the cost of installing air filtration system. all of the above
Direct use values of nature could include
- hiking in a national park. - hunting on public lands. - harvesting timber for construction. All the above
Among the chief concerns about the use of benefit-cost analysis is that
- monetizing the benefits of a policy proposal is difficult. - identifying and estimating implicit costs is a major challenge - equity might not be achieved if, for example, costs are distributed unevenly. All the above
Which of the following are reasons economists discount the benefits and costs of projects
- to account for inflation. - there is a time preference for things today rather than in the future All the above
It is desirable to value the environment so we have an idea about the
All of the above
Which one of the following techniques is an example of supply-side economic valuation?
Avoided cost valuation
The Benefit Cost Ratio is estimated as
BCR = Benefits/Costs
which one of the following valuation techniques is not based on the value of marketed goods or services?
Contingent Valuation
Which one of the following statements is true?
Discounting will decrease the magnitude of future costs and benefits
An economist estimates the value of a nature preserve by calculating the price premium people pay for houses located adjacent to the preserve. This is an example of what type of economic valuation?
Hedonic pricing
One method for determining whether or not to invest in a project is the Net Present Value. A project should not be invested in if the
NPV <0
One method for determining whether or not to invest in a project is the Net Present Value. A project should be invested in if the
NPV > 0
The social Welfare criterion used for Benefit Cost Analysis requires that
Net Benefits = Total benefits - Total costs
The benefit cost ratio can be used to determine which projects to fund. A project should be funded if
PVB/PVC > 1
A smaller discount rate is an indication that
What happens in the future important
In the final phase of benefit-cost analysis, one of the steps that is generally conducted is to
determine if an option is feasible.
Developing the marginal social benefit (MSB) or total social benefit (TSB) curves allows economists to
estimate the potential value of an environmental policy.
A "Potential Pareto Improvement" occurs when
society is better off if and only if the gainers could compensate the losers with a little left over.
An example of environmental services that may have a value not considered in the market is
the pollination of fruit orchards by honeybees.
If the discount rate is zero
the present and the future should be treated equally.
A larger discount rate is an indication that
the present is more important than the future
Indirect Use of nature could include
using wetlands as a natural filter for urban
A discount rate that is less than zero indicates that
we should suffer now because the future is more important than the present.
