Externalities
The table below shows the total benefits and costs of five possible plans (each of increasing scope) for a hospital to be built on a particular site.
|
Plan |
Benefit |
Cost |
|
A |
50 |
20 |
|
B |
90 |
50 |
|
C |
140 |
90 |
|
D |
210 |
150 |
|
E |
280 |
230 |
a) Indicate which plan should be adopted, using the marginal benefit equals marginal cost rule.
b) Confirm your answer in part (a) by computing each project's net benefit.
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