Question

Cost-benefit analysis A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. For the students of the college, the visual appearance of the campus is and . Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $8,160. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 490 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $17. The benefit of the beautification initiative, as suggested by the survey, is. Because the estimated benefit is than the cost, the college administrators undertake the beautification initiative. The calculation of the benefit of the beautification initiative relied on the ability of the administrators to capture the true willingness to pay of each student accurately. Which of the following scenarios would cause the survey used by the college administrators to yield misleading data on willingness to pay? Check all that apply. - Students believe they will eventually be charged their willingness to pay. - Students are surveyed at random, using conventional survey and data-gathering methods.

Answer 1

Answer:

Students believe they will eventually be charged their willingness to pay.

Explanation:

This would be a factor that would make the survey misleading. In this survey, the students are being asked how much money they are willing to pay so that the beautification project can be carried out. The students are meant to respond honestly. However, if for some reason the students believe that they will eventually be charged with the amount that they suggest, then they will be a lot less likely to answer truthfully.