Author Question: The costs of many environmental regulations can be calculated in dollars but the benefits often are ... (Read 135 times)

Ebrown · **on:** Jun 29, 2018

The costs of many environmental regulations can be calculated in dollars but the benefits often are in terms of lives saved (mortality) or decreases in the incidence of a particular disease (morbidity).

What does this imply about the cost-benefit analysis of environmental regulations? There is an old saying You can't put a price on a human life. Do you agree or disagree? Explain.

Question 2

How is average variable cost calculated? If a firm has total variable costs of 19,200 when producing 575 units, what is the firm's average variable cost?

What will be an ideal response?

duy1981999 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

We will need to translate the mortality and morbidity data into dollars if we are going to compare the costs and benefits of environmental regulation. For example, if we knew that a new regulation would impose a cost of 20 million on firms and that it would save one life, we would need to know whether a life is worth more than 20 million or less than 20 million. As ghoulish as these efforts to place a dollar value on a life may sound, government (and individuals, for that matter) need to make these calculations implicitly or explicitly. There is very substantial economic literature on the value of a life. Most studies estimate the value of a life in the range of 7 million to 9 million.

Answer to Question 2

Average variable cost is calculated by dividing total variable cost by the number of units of output. Therefore, the firm's average variable cost is equal to 19,200/575 which is equal to 33.39 .