ABSTRACT
Even if markets exist it would be unrealistic to expect them to be perfect. Tax distortions, quotas, regulations, etc. have the effect of making prices depart from true social opportunity costs even if external effects are not present. The presence of import quotas and exchange regulations might indicate an 'overvalued' exchange rate, for example. A related but distinct problem is that the project being considered might trigger off distortions in some other sector of the economy.
