Net Benefit

_Question 1: Calculate the Net Benefit associated with each of the following hypothetical public programs and indicate whether or not each could be recommended based on economic criteria alone when there is no budget constraint.
Alternatives Cost Benefit Net Benefit Adopt with No Budget Constraint?
1 $1,500,000 $1,750,000
2 $2,000,000 $1,500,000
3 $500,000 $1,000,000
4 $1,750,000 $3,500,000
5 $2,500,000 $1,000,000

_Question 2: Now, suppose that you have a limited budget. First, describe how you would rank the programs in order to determine which to implement first when there is a limited budget.

_Question 3: (2 points), Perform the calculations you describe in (2) for all of the alternatives that might be implemented with no budget constraint and indicate which alternative should be implemented first when there is a budget constraint. Is the first alternative to be implemented based on the criteria you have specified the alternative with the highest benefit or net benefit? Describe (with respect to your answer) why this does or does not always have to be the case?

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