Ch.7 Benefit-Cost Analysis Benefits Complete Test Bank 8e

Chapter 07

Benefit-Cost Analysis: Benefits

Multiple Choice Questions
 

1. Changes in productivity, health-care costs, loss of human capital and replacement/restoration of damaged property or businesses are all examples of ________. 
A. indirect approaches of cost estimation
B. indirect approaches of benefit estimation
C. direct approaches of cost estimation
D. direct approaches of benefit estimation

Difficulty: Easy

2. Preventative expenditures, hedonic estimation, surrogate markets and contingent valuation are all examples of ________. 
A. indirect approaches of cost estimation
B. indirect approaches of benefit estimation
C. direct approaches of cost estimation
D. direct approaches of benefit estimation

Difficulty: Easy

3. It is possible to estimate ________ by considering information about reductions in worker productivity and medical expenditures. 
A. demand for health care
B. health damages
C. output losses
D. willingness to pay for hospitals

Difficulty: Moderate
 

4. The cost of illness approach measures ____________, in order to estimate the benefits of pollution control in terms of reduced health related costs. 
A. only direct medical related expenses
B. both direct and indirect costs of illness
C. only indirect expenses associated with illness
D. increases in quality of life

 
Difficulty: Moderate

5. Health states and health indices are often ‘monetized,’ which means

A. the value is stated in dollars so that it can be compared with the cost of pollution control.
B. the value is stated in dollars so that people understand the sacrifice to produce an increase.
C. the value is stated in terms of the resources required to produce an increase.
D. the value is stated in terms of the amount that people are willing to pay for increases.

Difficulty: Moderate

6. Refer to Figure 7.1, above. Because of a reduction in air pollution, a farmer has experienced a shift in the supply curve from S₁ to S₂. If price is p₁, one way of estimating the value of the reduced pollution in terms of increased production is ______________.
A. (q₂-q₁)p₁
B. (a+b+c+d+e)-(a+b+c)
C. (d+e)
D. all of the above

 Difficulty: Moderate

7. Refer to Figure 7.1 above. Because of a reduction in air pollution a farmer has experience a shift in the supply curve from S₁ to S₂. If price is p₁, the value of the reduced pollution in terms of net income (total value of output minus total production costs) to the farmer is ____________.

A. indeterminate
B. (d+e)
C. (b+d)
D. (b+d) p₁

Difficulty: Moderate

8. Air pollution causes materials damages to exposed surfaces (like acid rain on statues). Which of the following is not considered when estimating materials damage values?

A.  Scenic values
B. Maintenance costs
C. Early replacement costs
D. All of the above are potential costs when estimating materials damages.

Difficulty: Easy

9. A simultaneous strength and weakness of contingent valuation is that it is used to determine values for nonmarket goods. People sometimes have difficulty answering contingent valuation questions because ___________________.

A. they lack experience paying for the good
B. they have not had time to learn about the value of the good and adjust their purchasing
C. they may have an incentive to misstate their true willingness to pay
D. all of the above

Difficulty: Moderate

10. Some of the costs that are not measured when employing direct damage measures from pollution are __________________.

A. averting costs
B. maintenance costs
C. increased medical expenditures
D. lost productivity

Difficulty: Easy

11. The amount that a person would accept in order to be compensated for a small loss in air quality is called ________. 
A. willingness to pay
B. willingness to accept
C. consumer surplus
D. change in consumer surplus

Difficulty: Easy

 

12. Suppose public authorities were contemplating locating a hazardous waste incinerator in a particular community. If the members of this community offered to pay $25,000 to keep it out of their area, this amount is equal to their ________ for clean air. 
A. willingness to accept
B. willingness to pay
C. use value
D. consumer surplus

Difficulty: Moderate


 13. There are two categories of willingness to pay estimation methods and these are called:
A. monetized and non-monetized costs.
B. market and non-market valuation.
C. revealed preference and stated preference approaches.
D. voluntary and mandatory responses.

Difficulty: Easy

14. Averting costs are __________________.

A. a type of revealed preference
B. purchased market goods that affect a consumer’s exposure to the ambient environment
C. one way to estimate willingness to pay
D. all of the above

Difficulty: Easy

15. Contingent valuation is __________________.
A. a type of revealed preference
B. a direct method of estimating damages
C. a survey approach asking consumers to answer questions regarding their willingness to pay
D. all of the above

Difficulty: Easy

16. A complication associated with estimating willingness to pay through revealed preference methods is:
A. willingness to pay depends on ability to pay.
B. individual measures of willingness to pay may underestimate true benefits due to fact that some people may be willing to pay for benefits to others.

C. both A and B. are complications associated with willingness to pay methods.
D. neither A nor B. are complications associated with willingness to pay methods.

Difficulty: Easy

17. Industrial wage studies that have been conducted reveal _______________.
A. estimates of the value of a statistical life
B. an individual’s valuation of their own life
C. an estimate of the benefits people might receive from reducing pollution related to premature death
D. both A and C.

Difficulty: Moderate

18. Valuing children’s health through willingness to pay methods is complicated because
A. children may be more impacted by environmental pollution than adults.
B. children are not capable of offering WTP information on their health.
C. some adults have been found to value the health of their children more than their own.
D. all of the above.

Difficulty: Easy

19. Estimating the value of environmental quality through housing prices may be more accurate than industrial wage studies because
A. housing prices are more accurately recorded than wage data.
B. wage prices are more regulated than housing prices.
C. industrial wage studies estimate the value of health benefits, but not the aesthetic impacts of environmental quality.
D. people own homes for a longer period than their working lives.

Difficulty: Easy

20. All of the following are examples of revealed preference methods that have been used to estimate the value of environmental quality except _________________.
A. travel costs
B. intercity wage differentials
C. contingent valuation
D. housing costs

Difficulty: Easy

21. There are two types of contingent valuation estimates that are practiced:
A. valuing environmental amenities and valuing health outcomes.
B. valuing protective regulation and valuing protective sanctions.
C. valuing time preferences and estimating risk aversion.
D. identifying respondent groups and estimating sampling procedures.

Difficulty: Easy

22. The goal of a contingent value questionnaire when valuing an environmental amenity is
A. to elicit respondents to reveal whether they would be willing to pay rather than go without the amenity.
B. to elicit respondents to reveal the average amount they would be willing to pay rather than go without the amenity.
C. to elicit respondents to reveal the maximum amount they would be willing to pay rather than go without the amenity.
D. to elicit respondents to reveal the minimum amount they would be willing to pay rather than go without the amenity.

Difficulty: Moderate

23. When estimating the benefits of improved environmental quality, the practice of discounting
A. decreases the relative value of programs that yield immediate benefits.
B. decreases the relative value of programs that produce benefits far into the future.
C. should be rejected, due to uncertainty of the discount rate.
D. all of the above.

Difficulty: Easy

24. The practice of estimating willingness to accept
A.  asks how much compensation people require for a reduction in environmental quality.
B. asks how much respondents are willing to pay for a reduction in environmental quality.
C. is constrained by a respondents’ ability to pay.
D. is typically equivalent to a respondent’s willingness to pay.

Difficulty: Easy

25. Peoples’ willingness to pay for environmental quality and amenities that they may never experience is called nonuse value. All of the following are explanations of nonuse value except
A.  experience value.
B. option value.
C. stewardship value.
D. existence value.

Difficulty: Easy

26. Option value refers to
A. valuing the option of being able to experience an environmental asset in the future.
B. valuing the ability to trade an environmental asset on the stock market.
C. the value assigned to different environmental alternatives.
D. the value people place on having the option to vote on environmental policy.

Difficulty: Easy

27. Answers to willingness to accept questions are typically

A. greater than their willingness to pay responses for the same item.
B. equal to their willingness to pay responses for the same item.
C. less than their willingness to pay responses for the same item.
D. have no direct relationship to their willingness to pay responses for the same item.

Difficulty: Easy.
 

28. In surveys and experimental work where people are asked to compare gains and losses relative to a reference point

A. they place a higher value on losses from this reference point than gains.

B. they place a lower value on losses from this reference point than gains.
C. they place an equal value on losses from this reference point than gains.
D. they are inconsistent with regard to whether gains or losses have a higher value.

Difficulty: Moderate 

29. _________ determine the specific relationship between ambient pollution exposure and adverse health effects.

A. Environmental economists
B. Surveys
C. Epidemiologists
D. Diffusion models

Difficulty: Easy

30. Suppose that the average person in a group of 150,000 people is willing to pay $10 to lower the probability of a random death among members of that group from 10 in 150,000 to 9 in 150,000. Then the total willingness to pay is $10 (150,000) = $1,500,000 is equal to
A. the willingness to accept an additional death in the group, based on willingness to pay.
B. the value of a statistical life, based on willingness to pay.
C. the value that each individual places on their own life, based on willingness to pay.
D. the average lifetime earned wage rate of members in the group.

Difficulty: Easy

31. Putting more sound proofing in a house near a noisy highway is an example of

A. cost effectiveness determination

B. contingent valuation

C. direct damage analysis

D. averting behavior

32. Differential wage rates among professions can be studied to estimate

A. natural resource damages

B. the value of a human life

C. the costs of chemical exposure

D. the cost effectiveness of work rules

33. In contingent valuation studies

A. people are asked directly about their willingness to pay

B. the objective is to estimate direct damages to natural resources

C. environmental health costs are estimated directly

D. people are sked to estimate environmental damage

34. Human damages from environmental pollution are mostly related to

A. impacts on transportation networks

B. human health effects

C. lost scenic values

D. costs of infrastructure degradation

35. To place greater value on benefits for future generation than for the current generation would require a discount rate to

A. increase

B. decrease

C. be set to zero

D. not be a factor in the value