Assignment 3: Prescribing Policies
Due Week 7 and worth 170 points
? Review Chapters 1 and 5.
? Read Review Question 8.
? Review Figure 5.2 Cost-effectiveness comparisons using four (4) criteria of adequacy.
? Review Case 1.1: Saving Lives and Saving Time
? Read Case 5.1: Opportunity Costs of Saving Lives The 55 mph Speed Limit.
? Read the Demonstration Exercise.
? Explore transportation policies of at least three (3) states. (Note: Websites such as: U.S. Department of Transportation, located at http://www.dot.gov/, various states’ department of Transportation, or the U.S. Environmental Protection Agency, located at http://www.epa.gov/.
Write five to six (5-6) page paper in which you:
(Note: Refer to Review Question 8 located at the end of Chapter 5 for criteria 1-3.)
1. Determine the following before deciding a prescription: (a) maximize effectiveness at the least cost; (b) maximize effectiveness at a fixed cost of $10,000; (c) achieve a fixed-effectiveness level of 6,000 units of service at a fixed cost of $20,000; (d) maximize net benefits, assuming that each unit of service has a market price of $10; (e) maximize the ration of benefits to costs, assuming that each unit of service has a market price of $10.
2. Determine which of the two main programs (Program I and Program II) should be selected under each of these criteria. Justify your position.
3. Describe the conditions under which each criterion may be an adequate measure of the achievement of objectives.
(Note: Refer to the Demonstration Exercise at the end of Chapter 5 for criteria 4-9.)
4. Determine the assumptions that govern estimates of the value of time lost driving, indicating which assumptions (if any) are more tenable than others. Justify your position.
5. Determine the best way to estimate the value of time. Justify your position.
6. Determine the best way to estimate the cost of a gallon of gasoline. Justify your position.
7. Determine the more reliable method to estimate driving speeds and miles per gallon by using (a) official statistics on highway traffic from the Environmental Protection Agency or by using (b) engineering studies of the efficiency of gasoline engines by the Department of Energy. Discuss any consequences of using one source rather than another. Justify your position.
8. Estimate the value of a life saved. Justify your position.
9. Determine which policy is preferable, (a) the 55-mph speed limit or (b) the 65-mph limit. Justify your position.