Case 7 1: Some Rough Cost-Benefit Numbers for a Bridge to Nowhere Located on...
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Case 7 1: Some Rough Cost-Benefit Numbers for a Bridge to Nowhere Located on pages 352 353 in Fiscal Administration (10th ed.) by Mikesell, Case 7 1 discusses the role of cost-benefit analysis in federal expenditures. Read the entire case study and answer the following questions (Consider These Questions): 1. Would you consider the bridge to be a worthwhile use of federal resources? 2. Why might the state of Alaska be interested in getting the bridge built, even though the total cost of the bridge exceeds the present value of the benefits from the bridge? From the standpoint of Alaska, what are the relevant costs and benefits? 3. How do the benefit-cost analysis results change if the discount rate is 7%? What about 2%? 4. The analysis is made with several assumptions about the use of the bridge, value of traveler time, and number of visitors. How would the analysis change with alternate assumptions that you believe to be potentially reasonable? Do your changes make the bridge more or less attractive as a public investment?
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