Economics · Cost-Benefit Analysis
In environmental economics, a 'shadow price' is primarily used in Cost-Benefit Analysis (CBA) when:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Benefits are measured using stated preference methods
- 2The discount rate applied is higher than the market interest rate
- 3Market prices fail to capture the true social opportunity cost of an environmental resource✓
- 4The project uses imported goods and domestic prices are distorted
Correct answer
Market prices fail to capture the true social opportunity cost of an environmental resource
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