Plan A
$4 million in construction costs
$2 million in maintenance costs
$8 million worth of clean water provided
Plan B
$10 million in construction costs
$3 million in maintenance costs
$16 million worth of clean water provided
Plan C
$2 million in construction costs
$0.5 million in maintenance costs
$5 million worth of clean water provided
-Using the net benefits formula, which of the above policies should be chosen?

Question

Plan A
 $4 million in construction costs
 $2 million in maintenance costs
 $8 million worth of clean water provided
Plan B
 $10 million in construction costs
 $3 million in maintenance costs
 $16 million worth of clean water provided
Plan C
 $2 million in construction costs
 $0.5 million in maintenance costs
 $5 million worth of clean water provided
-Using the net benefits formula, which of the above policies should be chosen?

Quizplus · Accepted Answer

To determine which plan should be chosen, we need to calculate the net benefits of each plan. The net benefit formula is:

Net Benefits = Total Benefits - Total Costs

Plan A: 
Net Benefits = $8 million - ($4 million + $2 million) = $2 million

Plan B: 
Net Benefits = $16 million - ($10 million + $3 million) = $3 million

Plan C: 
Net Benefits = $5 million - ($2 million + $0.5 million) = $2.5 million

Therefore, Plan B has the highest net benefits, making it the best choice. Despite having the highest construction and maintenance costs, it provides the most value in terms of clean water provided compared to the other plans.

Plan a $4 Million in Construction Costs