Macroeconomics 8th Edition by David Colander

Question

Macroeconomics 8th Edition by David Colander

Edition 8ISBN: 978-0077398088

Macroeconomics 8th Edition by David Colander

Edition 8ISBN: 978-0077398088

Exercise 2

Economist Steven Lands burg argues that if one believes in the death penalty for murderers because of its deterrent effect, using cost/benefit analysis we should execute computer heckers-the creators of worms and viruses-c-because the deterrent effect in cost saving would be greater than the deterrent effect in saving lives. Estimates are that each execution deters eight murders, which, if one valued each life at about $7 million, saves about $56 million; he estimates that executing hackers would save more than that per execution, and thus would be the economic thing to do.
a.Do you agree or disagree with Lands burg's argument? Why?
b.Can you extend cost/benefit analysis to other areas?

Explanation

Verified

All the resources are scarce and have limited availability. Economics is study of allocation of resources and it also tries to answer the three basic questions of what to produce, how to produce and for whom the product is produced.Marginal cost is the additional cost of producing one additional unit of product. Marginal revenue is the additional revenue gained by selling one additional unit of product. Opportunity cost is the gain of benefit which isa.If only economic point of view is considered then Mr. L's argument is correct because economics is an objective subject caring only about optimality and efficiency, but the lives of people is more of a social and personal thing and cannot be measured in terms of cost-benefit analysis, as many other lives are also related to the one who is punished and so social seriousness of the crime should also be seriously considered.b.The use of cost-benefit analysis can be extended to the decision were only financial or economic implications matter. When decision like starting a venture, project or doing n investment can easily use cost-benefit analysis as a tool.