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 that the decision to levy a tax on the emission of greenhouse gases costs 500 utils in present value and that the discount weight attached to the future benefit is $ \frac{1}{17} $ .In this case,the net benefit earned by the people is ________ utils.

Question

Quizplus · Accepted Answer

The net benefit is calculated by subtracting the present cost from the discounted future benefit. The future benefit of 1,000 utils is discounted by $ \frac{1}{17} $, resulting in $ \frac{1000}{17} \approx 58.82 $ utils. Subtracting the present cost of 500 utils from this gives $ 58.82 - 500 = -441.18 $ utils.

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