Surveys are often used to elicit public opinion on policies. Suppose Ann Arbor,
ID: 1115741 • Letter: S
Question
Surveys are often used to elicit public opinion on policies. Suppose Ann Arbor, Michigan is considering removing a dam on the Huron River. Rowers in the community want to keep the dam in place, but local environmental groups are interested in removing it to improve the river?s ecology and allow for other river-based recreational activities. A survey conducted by graduate students at the University of Michigan elicited resident?s attitudes and WTP values of the policy. 62% of the survey population preferred to remove the dam, 31% preferred to keep it and 7% expressed no preference. Average willingness to pay was $161/person for those preferring to keep it and $135/person for those preferring removal. Ann Arbor has a population of about 96,000.
a.) Calculate the total WTP for removing the dam and for keeping the dam.
b.) What is the maximum cost of dam removal that would make dam removal the best option based on cost-benefit analysis? Assume all costs and benefits occur in the present time period.
Explanation / Answer
A) WTP for the removing and keeping
Total Population of the state = 96000
Total number of people for keeping the dam (a)= 31% of total population ( given)
= 31 x 96000 /100 = 29,760
Willing ness to pay WTP for keeping dam (K) = 29760 x 161 ( WTP for keeping per person)
=$ 4791360
Total number of people for removal of DAm b = 62 % of total population = 62 x 96000/100 = 59520
The Willing ness to pay for the removal of dam ( R) = 59520 x 135 = $ 8035200
b) The Maximum cost of dam removal that would make the dam removal the best option based on cost-benefit analysis is $ 4791360 (+ $1)
Because the dam removal cost should be more than or equal the WTP of keeping the dam to make it best option.
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