Upcoming in Class

1. Upcoming in Class • 1stGroup Quiz - Monday Sept. 9th • Homework #2 Due Sept. 16 • Exam #1 Sept. 16 • Chapters 3, 4, 6 • Writing Assignment Due Oct. 23rd

2. Homework Problem 1 What is the difference between a common good, a public good, and an open-access resource? Give examples of each.

3. Private Goods Rivalrous Common Goods Fish, hunting game, grazing land Food, clothing, toys, cars Non-Excludable Excludable Satellite television, Golf courses, Cinemas National defense, lighthouses, clean air, information goods Public Goods Club Goods Non-Rivalrous

4. Well-Defined Property Rights • Exclusivity – • All benefits and costs accrued as a result of owning and using the resources should accrue to the owner, and only the owner, either directly or indirectly by sale to others • Transferability – • All property rights should be transferable from one owner to another in a voluntary exchange • Enforceability – • Property rights should be secure from involuntary seizure or encroachment by others (ie. eminent domain)

5. Homework Problem 2 What is willingness to pay (WTP)? What is your WTP for a dozen eggs from Meijer? What is your WTP for a dozen farm fresh eggs from organically raised free-range chickens? Explain why they are different (or the same).

6. Homework Problem 3 Assume a change in the quality of a good results in an increase in consumers’ willingness to pay. Assume also that the supply of the good is unchanged. Illustrate this situation graphically and identify the change in net benefits attributable to the change in quality.

7. Homework Problem 4 • Consider the following supply and demand schedule for steel. • Pollution from steel production is estimated to create an external cost of $60 per ton. • Show the external cost, market equilibrium, and social optimum on a graph

8. Homework Problem 4 What kinds of policies might help to achieve the social optimum? How would this policy affect consumers? How would this policy affect producers? What effect would the policy have on market equilibrium price and quantity?

9. Common Good • Rivalrous and non-excludable • Tragedy of the Commons • When a resource is non-excludable, individuals act independently and rationally consume with their own self-interest in mind. Ultimately, this will deplete the resource, even when it’s not in anyone’s best interest.

10. Salmon Fishing

12. Constant Returns Diminishing Returns Absolutely Diminishing Returns Total Product (in hundreds of tons of fish) Number of Boats (in hundreds)

13. Figure 4.2: Total Revenue, Total Costs, and Profits for the Entire Fishery Total Revenue Total Costs Dollars (in millions) Fishery Profits Number of Boats (in hundreds)

14. Table 4.1: Total Fish Catch, Revenue, Costs, and Profit

15. Figure 4.3: Marginal Revenue and Cost Analysis of Fishery Average Revenue Open-access Equilibrium Marginal Revenue Dollars (in thousands) License Fee • • Marginal Cost Efficient Outcome Number of Boats (in hundreds)

16. Table 4.2: Average Revenue, Costs, and Profits

17. Table 4.3: Marginal Revenue and Cost Analysis of Fishery

18. Upcoming in Class • 1stGroup Quiz - Monday Sept. 9th • Homework #2 Due Sept. 16 • Exam #1 Sept. 16 • Chapters 3, 4, 6 • Writing Assignment Due Oct. 23rd