1. (a) Suppose you are part of a research team evaluating a proposal to clean up a hazardous waste site. You are in charge of assessing the incremental benefits. What method would you choose to derive the estimation? Explain briefly.

(b) Based on your selection, outline your research plan for this specific estimation problem. Be sure to identify the following in your outline: a general description of your model, the relevant market for your model, the primary variables of interests, the data requirements, and any potential bias in your results.

2. Compare and contrast the term user value, existence value, and option value.

3. A cost-benefit analysis involves a comparison of potential costs and potential benefits associated with a project. How do cost-benefit studies incorporate future costs and returns? What are the potential problems associated with attempting to measure future costs and benefits associated with a project?

4. Elucidate economists use two major approaches to estimate incremental environmental costs. Which in your view likely produces the most reliable estimates?

5. Suppose economists estimate the following cost and benefit functions associated with 1990 CAAA (Clean Air Act Amendments) in the US.

TSB=80A-0.4A2 MSB=80-0.8A
TSC=20A+0.85A2 MSC=20+1.7A

Where A represents the percent of pollution abatement, and costs and benefits are measured in millions of dollars.

(a) Find the TSB and TSC associated with an abatement standard of 30. Based solely on the relative values of TSB and TSV, can you state definitively whether this abatement level is efficient? Explain.