Question

4. Cost-benefit analysis A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. For the students of the college, the visual appearance of the campus is   and   . Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $4,420. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 260 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $13. The benefit of the beautification initiative, as suggested by the survey, is. Because the estimated benefit is   than the cost, the college administrators   undertake the beautification initiative. The calculation of the benefit of the beautification initiative relied on the ability of the administrators to capture the true willingness to pay of each student accurately. Which of the following scenarios would cause the survey used by the college administrators to yield misleading data on willingness to pay? Check all that apply. Students are surveyed at random, using conventional survey and data-gathering methods. Students believe they will eventually be charged their willingness to pay.

Answer 1

The visual appearance of the campus is NON RIVAL and NON EXCLUDABLE.

reason- Noone can be excluded from consumption of visual campus beautification as well as consumption by one cannot decrease the beautification available for other.

The benefit of the beautification initiative, as suggested by the survey, is 260*13= $3380

Because the estimated benefit is LESS than the cost, the college administrators SHOULD NOT undertake the beautification initiative.

Reason- Cost> Benefit as $4420>$3380.

So college should not undertake beautification.

Both statements-

Students are surveyed at random, using conventional survey and data-gathering methods.

reason- Since students are selected at random, equal representation of students is not there.

Students believe they will eventually be charged their willingness to pay.

reason- This help students to quote as less a willingness to pay as possible.

If it helps kindly upvote