Question

Suppose that 1,000 people are surveyed regarding their valuation of the benefits of a proposed project to remediate a former industrial site - that is, to remove some of the contaminants from the site, and to make the site suitable for some other use. The actual cost of clean-up is equal to $4 per person. The survey reveals the following results: 250 people receive $10 in value from the cleanup, 250 people receive $8 in value from the cleanup, 250 people receive $6 in value from the cleanup, 250 people receive $4 in value from the cleanup.

Answer 1

Total valuation of the proposed clean-up project = Total valuation equal to total value people associate=

(250$\times$10+250$\times$8+250$\times$6+250$\times$4)=$7000

Consumer surplus from the project = extra value over the cost i.e 7000-(4$\times$1000) =$3000