Scenario: Suppose the government decides to levy a tax on the emission of greenhouse gases. The tax on the emission of greenhouse gases has been estimated to provide a future benefit of 1,000 utils, while the current cost of the tax imposed is 700 utils.
-Refer to the scenario above.Suppose the discount weight attached to the future benefit is $ \frac{1}{7} $ .People will earn a net benefit equal to ________ utils.

Question

Quizplus · Accepted Answer

The future benefit of 1,000 utils is discounted by $ \frac{1}{7} $, resulting in a present value of approximately 142.86 utils. Subtracting the current cost of 700 utils gives a net benefit of approximately ‒557.14 utils, which rounds to ‒500 utils.

Scenario: Suppose the Government Decides to Levy a Tax on the Emission