Question

Consider an advisor wanting to conduct a cost benefit analysis for a proposed Canadian high speed rail way. Discuss what the advisor might state for:

a) Why the government should undertake this project (market failure, public good, etc.)

b) What are the key benefits and cost categories.

c) What type of sensitivity analysis can be undertaken.

Answer 1

a) High Speed Railway comes under the welfare and also the well being of the public and this counts as a public good which makes the government to undertake this project

b) The costs include initial capital, administration costs, maintenance costs, operation costs, cost of labor etc.

The benefits of the project include the norms of public welfare apart from the sensing of overall development that can get to attract the foreign investors on the whole.

c) Factorial sensitivity analysis can be regarded as the best one here as the parameter.sensitivity of each factor is analysed on the whole.