Cost benefit analysis

There are two parts to this essay question. The first parts(a. and b.) below are required and worth 20 points for which the minimum word requirement and the grading rubric applies. Please indicate the word count in parenthesis at the end of part (a.).

Part (c.) is optional and it’s worth 10 extra credit points.

Assume that you are convinced that if something isn’t done now, global warming is going to create extensive problems and damage by the end of this century. 

a. If you were preparing a cost-benefit analysis of the impacts and had a 100 year horizon for your projections, would you use a 3% or an 8% discount rate?

b. Explain what your thinking is both behind using the discount rate you chose based on present value and your thinking about the intergenerational questions. 

c. optional: Do you think cost-benefit approach as described in “Pricing the Priceless” would work better or worse in this situation and explain? Explain your answer concisely for full extra credit.

marginal cost

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