Assignment 3: Prescribing Policies
Due Week 7 and worth 170 points

Preparation

• Review Chapters 1 and 5. 
• Read Review Question 8.
• Review Figure 5.2 Cost-effectiveness comparisons using four (4) criteria of adequacy.
• Review Case 1.1: Saving Lives and Saving Time
• Read Case 5.1: Opportunity Costs of Saving Lives  ̶  The 55 mph Speed Limit.
• Read the Demonstration Exercise. 
• Explore transportation policies of at least three (3) states. (Note: Websites such as: U.S. Department of Transportation, located at http://www.dot.gov/, various states’ department of Transportation, or the U.S. Environmental Protection Agency, located at http://www.epa.gov/.

Write five to six (5-6) page paper in which you:

(Note: Refer to Review Question 8 located at the end of Chapter 5 for criteria 1-3.)

1. Determine the following before deciding a prescription: (a) maximize effectiveness at the least cost; (b) maximize effectiveness at a fixed cost of $10,000; (c) achieve a fixed-effectiveness level of 6,000 units of service at a fixed cost of $20,000; (d) maximize net benefits, assuming that each unit of service has a market price of $10; (e) maximize the ration of benefits to costs, assuming that each unit of service has a market price of $10. 
2. Determine which of the two main programs (Program I and Program II) should be selected under each of these criteria. Justify your position.
3. Describe the conditions under which each criterion may be an adequate measure of the achievement of objectives.