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The town of Mayberry is thinking of expanding its airport. One problem with the expansion is that it would result in more airplane noise. For people who live near the airport, hearing that noise would cause as much unpleasantness as the collective loss of $100,000 every year. True or False: When Mayberry weighs the costs and benefits of its airport expansion, that $100,000 should count as a cost. | True. When considering the expansion of the airport, Mayberry should take into account all relevant costs and benefits of the project. The $100,000 figure that represents the collective unpleasantness and loss of well-being for the people living near the airport due to increased noise pollution is an example of an external cost or negative externality. External costs are real costs to society and should be included in a comprehensive cost-benefit analysis to ensure that all impacts of the expansion are accurately assessed. This helps in making a more informed and equitable decision. |
The town of Mayberry is thinking of expanding its airport. One problem with the expansion is that it would result in more airplane noise. For people who live near the airport, hearing that noise would cause as much unpleasantness as the collective loss of $100,000 every year. True or False: When Mayberry weighs the costs and benefits of its airport expansion, that $100,000 should count as a cost. | True. The $100,000 figure represents the negative externality caused by the airport expansion. A negative externality is a cost that affects a third party who did not choose to incur that cost. In this case, the people living near the airport would suffer from the increased noise pollution, which decreases their quality of life. This cost is not borne by the airport or the users of the airport directly. When conducting a cost-benefit analysis, it is important to consider all costs and benefits, including externalities. The $100,000 in this case is a real cost, even if it does not represent an actual monetary transaction. It quantifies the negative impact on the residents near the airport. If this cost is not included in the analysis, the true cost of the airport expansion would be underestimated, leading to a decision that might not be optimal for society as a whole. Therefore, the $100,000 should indeed be counted as a cost when weighing the costs and benefits of the airport expansion in Mayberry. |
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