A large rural county is considering establishing a medical transport unit that would use helicopters to fly

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A large rural county is considering establishing a medical transport unit that would use helicopters to fly emergency medical cases to hospitals. Analysts have attempted to estimate the benefits from establishing the unit in two ways. First, they surveyed a random sample of residents to find out how much they would be willing to pay each year for the unit. Based on responses from the sample, the analysts estimated a total willingness to pay of $8.5 million per year. Second, the analysts estimated the dollar value of the improvements in health outcomes and avoided medical costs of users of the unit to be $6.2 million per year.
Taking the analysts’ estimates at face value, specify the following:
a. The aggregate of individuals’ annual option prices for the unit.
b. The annual total expected gain in social surplus from use of the unit.
c. The annual aggregate option value for the unit.
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Cost Benefit Analysis Concepts and Practice

ISBN: 978-0137002696

4th edition

Authors: Anthony Boardman, David Greenberg, Aidan Vining, David Weimer

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