Question

1Suppose the government decides to levy a tax on the emission of greenhouse gases. The tax on the emission of greenhouse gases has been estimated to provide a future benefit of 1,000 utils, while the current cost of the tax imposed is 700 utils. People will earn a net benefit of ________ if the discount weight of the future benefit is 0.1.

a)-950 utils

b)-600 utils

c)930 utils

d)950 utils

2A bag contains ten green balls, five blue balls, and fifteen yellow balls. If an individual picks a green ball from the bag, she wins $300. If she picks either a blue ball or a yellow ball, she loses $200. The expected value of the game is ________.

a)$27

b)-$15.64

c)-$33.33

d)$33.75

3The ________ of a project is the sum of all the costs and benefits associated with the project, using present values to make the costs and benefits comparable.

a)gross present value

b)discounted value

c)cumulative present value

d)net present value

Answer 1

Q-1 answer- (B) -600 utils

Explanation:- future benifit *discount weight - current cost = net Benifits

= $1000*0.1 - $700

= $100-$700

=-$600

Q-2 answer: (C) -$33.33

Explanation:- probability for winning is 10/30= 0.3333 whereas probability for loss is 20/30=0.6666. so the Expected value = $300(0.3333)-$200(0.666) = $99.99-$133.33 = -$33.33.

Q-3 answer :- Net present value

Explanation:- net present value is the sum of all.const and benifits over discounted rate. which will show the real present value of project