1 / 17

exam 1 review

exam 1 review. environmental decision making: benefit-cost analysis. how do we get those benefits?. nature and causes of environmental problems. Nonexclusive property rights => Externalities No property rights => Open access problem Public goods. the market for steel. expect 5 results.

harding-mercer
Download Presentation

exam 1 review

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. exam 1 review

  2. environmental decision making:benefit-cost analysis

  3. how do we get those benefits?

  4. nature and causes of environmental problems • Nonexclusive property rights => Externalities • No property rights => Open access problem • Public goods

  5. the market for steel

  6. expect 5 results • output of steel too great • too much pollution produced • price of steel too low • no incentives to search for ways to yield less pollution per unit steel • recycling and reuse of polluting substances discouraged since release into river is so inefficiently cheap

  7. to correct externalities • bargain (Coase) • taxation (Pigou)

  8. open-access • fishing / grazing rights / whales vs. chickens • tragedy of the commons • common-pool resources • nonexclusivity (exploited by anyone) • divisibility / rival (your use diminishes my use)

  9. bison harvesting

  10. public goods • characteristics • nonexcludable (even if do not pay cannot be excluded from enjoying it) • indivisible / nonrival (my enjoyment does not lessen your enjoyment) • national defense / air / information / diversity • free-rider problem

  11. how to think about the future? • Two period model • To maximize dynamic efficiency, set PV of MNB from the last unit in period 1 equal to the PVMNB from the last unit in period 2.

  12. Demand: P = 8-0.4Q, MC = $2 (constant)20 total units • 10.238 units in period 1 / 9.762 units period 2 • Efficient prices? Marginal user cost?

  13. definitions of sustainability • Hartwick rule (“weak sustainability”) • value of the total (natural + physical) capital stock is maintained • Strong sustainability • value of the natural capital stock is maintained • Environmental sustainability • quantities of resources should be maintained (not value)

More Related