Pay attention to the negative signs in the table!
2) CBAs have been conducted for six proposed projects. None of hese projects are mutually exclusive, and the agency has a sufficient budget to fund those that will make society better off. The following findings from the CBAs are summarized in millions of dollars:
Net Social BenefitsNet Group I BenefitsNet Group II Benefits
Project A$2 $2 $0
Project B$6 $8 -$2
Project C$4 $12 -$8
Project D-$1 -$3 $2
Project E-$2 -$1 -$1
Project F-$2 $4 -$6
Group I consists of households with annual incomes over $25,000, whereas Group II consists of households with annual incomes under $25,000.
a) According to the net benefit rule, which of these projects should be funded?
b) For which of the projects might distributional considerations be an issue?
d) Recomputate the social net benefits of the six projects using a distributional weight of 1 for Group I and ad distributional weight of 2 for Group II. Using these weight-adjusted net social benefits estimates, indicate the circumstances under which each project might actually be undertaken. In doing this, assume that the distributional weight for Group II is an upper bound- that is, it probably overstates society’s true generousity towards lower income households.
