ECN 104 Chapter 8: Chapter 8

Q1 In a modified B/C ratio:

a. Disbenefits and M&O costs are subtracted from benefits in the numerator

b. Disbenefits are subtracted from benefits, and M&O are added to cost in the denominator

c. Disbenefits are added to costs, and M&O costs are subtracted from benefits

d.M&O receives the same treatment as the salvage value

Q2. To convert constant-value dollars into inflated dollars, it is necessary to take CV dollars and:

a. Divide by (1 + i_f) ⁿ

^b. Divide by (1 + f ) ⁿ

^c. Divide by (1 + i) ⁿ

d. Multiply by (1 + f )ⁿ

^{please explain me why you chose the answer.}

Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F/P, i, n-t) factors?

A) 0

B) the unknown value of ERR (i')

C) MARR

D) IRR

4. If the government imposes a price floor of $3 on orange juice, which of the following would be the deadweight loss generated by the policy? (a) G + H. (b) L + M. (c) I+N. (d) F + K.