In 1997, the EPA proposed an increase in the national air quality standards for particulate matter (PM). Because the change was considered a major rule, the agency was required to conduct an RIA and assess the potential costs and benefits of the proposed standard. The completed RIA can be accessed at www.epa.gov/ttn/oarpg/naaqsfin/ria.html. As part of this RIA, benefit and cost data for the existing standard were given and are replicated here: 

Control Region                  Annual Control Cost ($1990 millions)

Midwest/Northeast…………....….       380

Southeast………………………………            2

South Central…………………..….           230

Rocky Mountain………………........       210

Northwest…………………………...          140

West…………………………………              130

National……………………….......          1,100

Benefit Category.................................Monetized Benefits ($1990 billions)

Mortality

Short-term exposure…………………………………..$2.950

Long-term exposure……………………………………..2.860

Chronic bronchitis………………………………….……..2.010

Hospital admissions        

Total respiratory…………………………………….……..0.022

Congestive heart failure……………...………….…… 0.003

Ischemic heart disease………………………………….0.005

Upper respiratory systems

Asthma attacks ……………………………………………0.001

Work loss days…………………………………………….0.015

Minor restricted activity days…………………......0.057

Consumer cleaning cost savings……………...… 0.039

Visibility………………………………………………….……0.320

Total Benefits    

Using short-term mortality……………………....$5.400

Using long-term mortality………………......./....$5.300

a. Examine the control cost estimates, and provide a plausible explanation of why there are incremental costs differences across regions for meeting the PM standard.

b. Economically, can you justify the PM standard? Explain.

c. List some of the limitations associated with benefit-cost analysis. Which of these are applicable to this particular economic analysis? Explain.