CEA - Certified Economic Analyst Policy Evaluation and Analysis Questions and Answers

Question 1

An economic analyst is conducting a cost-benefit analysis for a proposed public infrastructure project.
The project has a present value of total benefits estimated at $80 million and a present value of total costs estimated at $65 million.
Based on the standard decision rule, what is the Net Present Value (NPV) of the project and what is the appropriate recommendation?

Accepted Answer

NPV is $15 million; accept the project.

Answer

NPV is $145 million; accept the project.

Answer

The NPV cannot be determined without the discount rate.

Answer

NPV is -$15 million; reject the project.

Question 2

A national government wants to evaluate the impact of a new nationwide carbon tax policy on industrial emissions. The policy was implemented for the entire country at the same time, making a traditional control group unavailable. However, detailed emissions data is available for many years prior to the policy's implementation. Which evaluation method is most appropriate for this scenario?

Accepted Answer

Interrupted Time Series (ITS)

Answer

Randomized Controlled Trial (RCT)

Answer

Difference-in-Differences (DiD)

Answer

Regression Discontinuity Design (RDD)

Question 3

An analyst uses a difference-in-differences (DiD) model to assess the impact of a regional training program on workers' wages. The analysis compares the change in wages for workers in the region with the program (treatment group) to the change in wages in a similar, neighboring region without the program (control group). For the DiD estimate to be valid, what is the critical 'parallel trends assumption'?

Accepted Answer

In the absence of the training program, the wage trends in the treatment and control regions would have been the same.

Answer

The wage levels in both regions must have been identical before the program started.

Answer

The economic structures of both regions must be completely identical.

Answer

The control group's wages must remain static throughout the entire analysis period.

Question 4

Which of the following best describes the primary purpose of conducting a Regulatory Impact Analysis (RIA)?

Accepted Answer

To systematically assess the potential benefits, costs, and effects of a proposed regulation to inform decision-making.

Answer

To guarantee that a new regulation will increase government tax revenue.

Answer

To provide a legal justification for regulations after they have been implemented.

Answer

To exclusively focus on the financial costs imposed on private businesses.

Question 5

A city is considering a policy to reduce noise pollution from a nearby airport. To value this non-market good for a cost-benefit analysis, analysts conduct a survey asking residents near the airport how much they would be willing to pay in higher property taxes for the implementation of new noise-reduction technology. This survey-based valuation technique is known as:

Accepted Answer

Contingent Valuation

Answer

Hedonic Pricing

Answer

Travel Cost Method

Answer

Revealed Preference

Question 6

A policy analyst is comparing two potential social policies. Policy A aims to maximize the sum of all individuals' utilities, while Policy B is designed to maximize the well-being of the worst-off person in society. Policy B's objective is most consistent with which social welfare function?

Accepted Answer

Rawlsian (Maximin)

Answer

Utilitarian

Answer

Pareto

Answer

Kaldor-Hicks