1.

The following data are for a series of increasingly extensive flood control projects:


Total cost
per year

Total benefit
per year

Plan A

levees

$10,000

$16,000

Plan B

small reservoir

24,000

36,000

Plan C

medium reservoir

44,000

52,000

Plan D

large reservoir

72,000

64,000

R-1 REF30012

Refer to the above data. For Plan D marginal costs and marginal benefits are:

A.

$72,000 and $64,000 respectively.

B.

$28,000 and $12,000 respectively.

C.

$24,000 and $18,000 respectively.

D.

$16,000 and $28,000 respectively.



2.

The following data are for a series of increasingly extensive flood control projects:

Total cost
per year

Total benefit
per year

Plan A

levees

$10,000

$16,000

Plan B

small reservoir

24,000

36,000

Plan C

medium reservoir

44,000

52,000

Plan D

large reservoir

72,000

64,000

R-1 REF30012

Refer to the above data. On the basis of benefit-cost analysis government should:

A.

undertake Plan D.

B.

undertake Plan C.

C.

undertake Plan B.

D.

undertake Plan A.



3.

The following data are for a series of increasingly extensive flood control projects:

Total cost
per year

Total benefit
per year

Plan A

levees

$10,000

$16,000

Plan B

small reservoir

24,000

36,000

Plan C

medium reservoir

44,000

52,000

Plan D

large reservoir

72,000

64,000

R-1 REF30012

Plan C above entails:

A.

marginal benefits in excess of marginal costs.

B.

fewer spillovers than either Plan A or Plan B.

C.

an overallocation of resources to flood control.

D.

an underallocation of resources to flood control.




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