Question

Part I: True/False and Justify: For each of the following statements, choose whether it is true or false and justify your choice with a short sentence. 1. One challenge associated with poor households' investment in health is that many health investments have important externalities. 2. If a good or service is not traded on markets, there is no way to value it. 3. In Cost-Benefit Analysis, quantifying benefits is more difficult than quantifying costs.

Answer 1

1) Solution: True
Explanation: An important externality in healthcare is that you benefits when other are healthy as it decreases your likelihood of falling sick (assuming it's contagious) but these are difficult to measure.

2) Solution: False
Explanation: Although the market prices gives an accurate estimation of the value of a good or service, however when these are not traded on markets economists often applies a proxy the "shadow" cast on decisions observed by prices which directly cannot be observed.

3) Solution: True
Explanation: The benefits occur over a longer time horizon and on contrast the costs arises over a short time horizon. Moreover benefits have to be estimated as causal effects of the program and difficult to determine it's value in dollar terms