Framework Of Analysis Test Bank Docx Ch.6

Chapter 06

Framework of Analysis

Multiple Choice Questions

 1. Benefit-cost analysis incorporates ________ valuation of all inputs and outputs related to the project whether or not they are transacted in private markets. 
A. market
B. private
C. social
D. non-market

Difficulty: Easy

2. Cost effectiveness analysis assumes a single objective and

A. estimates the costs of competing alternative approaches to achieving that objective.
B. compares the benefits of that objective and the costs of obtaining that objective.
C. estimates the damage or effect of obtaining that objective on a valued resource.
D. compares it to the effects of other competing objectives.

Difficulty: Easy

 

3. When it comes to determining the appropriate environmental project to select, the ________ link(s) benefit-cost analysis to our theoretical model of the economics of the environment. 
A. equimarginal principle
B. socially efficient scale
C. social discount rate
D. economies of scale

Difficulty: Easy

4. The 1980 Comprehensive Environmental Response, Compensation and Liability Act resulted in the US Department of Interior defining the calculation of damages to a valued resource as
A. the lost value of the resource.
B. the value of restoring the resource.
C. the value of replacing the resource with another resource.
D. the lesser of the lost value of the resource or the value of restoring the resource.

 
Difficulty: Easy

 

5. An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people. 
A. proportional; less
B. proportional; the same
C. proportional; greater
D. progressive; the same

 
Difficulty: Easy.
 

6. An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people. 
A. progressive; less
B. regressive; greater
C. progressive; higher
D. progressive; the same

Difficulty: Easy

7. An environmental program is ________ if the net effect of that policy has proportionally ________ effect on low-income people as on high-income people. 
A. proportional; less
B. regressive; greater
C. regressive; the same
D. regressive; lower

 
Difficulty: Easy

8. Assume two projects with uncertain outcomes have the same expected value. Project A has two similar outcomes with similar probabilities of occurrence while project B has a low probability of a disaster and a high probability of a positive outcome. A________ decision maker would choose Project A. 
A. risk-neutral
B. risk-loving
C. risk-averse
D. perfectly informed

 
Difficulty: Easy

9. Given the information in the following table, ________ is the most cost-effective way to reduce the phosphorous concentration in the Bay of Quinte.

   
A. reduction in phosphorus inputs from agricultural runoff
B. alum treatment of sediments in the bay
C. tertiary treatment at sewage treatment plants
D. treatment of wastewater from water treatment plants

 Difficulty: Easy

 

 10. Benefit-cost analysis has been criticized

A. as a means of allowing public agencies to justify ever-larger budgets. 

B. because it limits political discussion and decision-making about prospective public projects and programs.

C. as a way of limiting spending on public programs due to the difficulty of measuring benefits relative to costs.

D. all of the above.

Difficulty: Easy

 

11. The socially efficient scale maximizes the net social benefits from a project because
A. consumer preferences as revealed in market prices are maximized where MAC=MD.
B. damages are minimized where MAC=MD.
C. total abatement costs are less that total damage costs where MAC=MD.
D. net social benefits are maximized where MAC = MD.

Difficulty: Easy

13. There are two primary types of public environmental programs where benefit-cost analysis is typically done:

A. physical projects and regulatory programs.
B. programs initiated by the for profit sector and programs initiated by the not for profit sector.
C. fixed budget and fixed impact projects.
D. net benefit projects and sensitivity analysis projects.

Difficulty: Easy

14. Refer to the figure above. A program that reduces emissions from the uncontrolled level of e₁ to emissions level e₂

A. reveals total costs equal to area (a+b+c+d).
B. is clearly preferable to e*, where MD=MAC.
C. yields negative net benefits because the MD curve lies above the MAC curve.
D. reveals net benefits of (a + b) – (b).

Difficulty: Moderate 

15. The choice of a discount rate is influenced by

A. time preference.
B. whether the effects cross generations.
C. the rate of inflation.
D. all of the above.

Difficulty: Easy.
 

16. Vertical equity treats

A. people in the same circumstances identically.
B. people in the same circumstances proportionately.
C. people in different circumstances differently.
D. none of the above.

Difficulty: Easy.

17. Horizontal equity treats

A. people in the same circumstances identically.
B. people in the same circumstances proportionately.
C. people in different circumstances differently.
D. none of the above.

Difficulty: Easy 

Table 1: Benefits and costs of a local environmental impact on a 3-person community

18. The table above represents 
A. a regressive outcome.
B. a progressive outcome.
C. horizontal equity.
D. vertical equity.

Difficulty: Moderate

 19. A cost-effective project is the one that

A. achieves a given level of benefits.
B. is the lowest possible cost among all possible project options.
C. achieves the maximum net benefits possible.
D. both A and B.

Difficulty: Moderate

20. An environmental project requires investments of $100,000 in year 1, year 2, and year 3 and yields benefits of $20,000 in year 1; $45,000 in year 2 and $150,000 in year 3. What is the net present value of the project at a discount rate of 4% (rounded to the nearest dollar)?

A. +$83,698.
B.  -$84,242.
C.  - $96,272.
D.  None of the above.

Difficulty: Moderate

21. A state is considering two different environmental projects that offer the net benefit streams displayed in the table below:

Benefits ($) in Year:

.

Which project offers the greatest present value at a discount rate of 10%?

A. Project A
B. Project B
C. Project C
D. The projects are equal in the present value of their net benefits.

Difficulty: Moderate

22. Risk assessment consists of several separate steps, namely:

A. exposure analysis, discount analysis, distributions analysis.
B. episodic analysis, dose-exposure analysis, community characterization.
C. exposure analysis, dose-response analysis, risk characterization.
D. emission analysis, dose-response analysis, community characterization.

Difficulty: Easy

23. Each of the following is a step in conducting a benefit-cost analysis of a project, except:

A. prepare a clear overview of the project including specifics about scale and perspective
B. estimate the social costs and benefits of the inputs and outputs of the project
C. quantitatively describe the inputs and the outputs of the program
D. all of the above are steps in benefit-cost analysis

Difficulty: Easy

24. During the process of risk valuation, we often use the likelihood of outcomes to calculate the __________________.

A. probability distribution
B. expected value
C. future value
D. valuation

Difficulty: Moderate.
 

25. An oil refinery plant has requested permission from the community to expand. The expansion is likely to increase the number of deaths in the community due to increased rates of cancer. The number of deaths and their associated probabilities is revealed in the table below:

What is the expected value of 0 deaths?

A. 0
B. .8
C. .33
D.  Cannot be determined.

Difficulty: Moderate

26. An oil refinery plant has requested permission from the community to expand. The expansion is likely to increase the number of deaths in the community due to increased rates of cancer. The number of deaths and their associated probabilities is revealed in the table below:

What is the expected number of deaths?

A. 0
B. .8
C. .33
D.  Cannot be determined.

Difficulty: Moderate

27. _________ is a type of risk analysis that focuses on looking at different policy options and the levels of risk they may entail.

A. Risk-benefit analysis
B. Comparative-risk analysis
C. Risk characterization
D. Exposure analysis

Difficulty: Easy

28. As part of an environmental risk assessment, scientists and epidemiologists engage in dose-response analysis to determine the relationship between

A. medicine and cure rates.
B. exposure and impacts.
C. pesticides and harvest.
D. benefits and costs.

Difficulty: Easy

29. In the United States, environmental impact analyses are mandated by the

A. Environmental Protection Agency (EPA).
B. Environmental Impact Agency (EIA).
C. Regulatory Impact Agency (RIA).
D. National Environmental Policy Act (NEPA).

Difficulty: Easy

30. The 1980 Comprehensive Environmental Response, Compensation and Liability Act allows for the calculation of restoration costs in order to determine damages. Some of the difficulties of calculating restoration costs include

A. determination of the baseline resource quality.
B. the choice of alternative ways of restoring a resource in a cost-effective way.
C. the determination of a natural or environmental resource of equivalent value.
D. all of the above are difficulties with determining restoration costs.

Difficulty: Easy

31. Cost effectiveness analysis

A. estimates the benefits and costs of a project in monetary terms

B. estimates the benefits but not the costs of projects

C. estimates the costs but not the benefits of projects

D. analyzes neither the benefits nor costs of projects

32. An analyst estimated the costs of restoring a resource to its original state. This person is doing

A. benefit-cost analysis

B. cost effectiveness analysis

C. regulatory impact analysis

D. resource damage assessment

33. The best way to describe the results of a benefit-cost study is

A. project long-term costs

B. project net benefits

C. project long-run benefits

D. project discount rate

34. If the discount rate used in a project analysis is increased

A. net benefits will normally increase

B. net benefits will be made equal to net costs

C. net benefits will normally decrease

D. net benefits will be unaffected

35. The first step in risk assessment is

A. benefit estimation

B. damage calculation

C. discounting future benefits

D. exposure analysis