6. Suppose a government agency improves well quality from wo to wi at a cost of C, and observes an improvement in health from ho to h1, and it places a value V on this health improvement. (Don't worry about how one could come up with a valuation V, let's just assume that this value is correct.) Is it correct to think that the net benefit from this program is V - C? When might this be an overstatement of the utility gains? When might it be an understatement? When might it be approximately correct? Hint:

6. Suppose a government agency improves well quality from wo to wi at a cost of C, and observes an improvement in health from ho to h1, and it places a value V on this health improvement. (Don't worry about how one could come up with a valuation V, let's just assume that this value is correct.) Is it correct to think that the net benefit from this program is V - C? When might this be an overstatement of the utility gains? When might it be an understatement? When might it be approximately correct? Hint:

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 16RQ: What is the key difference between a fee-for-service healthcare system and a system based on health...

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