ch7 environmental economics Presentation

Question 1

what is environmental economics?

Answer 1

• not only about money
• involves persuading people and organizations to act in a wya that benefits the environment within a democratic framework

Question 2

what does environmentaal economic focus in?

Answer 2

◼Controlling pollution and environmental damage

◼Sustaining renewable resources

Question 3

what does environmental decision making involve?

Answer 3

tangible and intangible factors

Question 4

what is a tangible factor

Answer 4

• one you can touch buy and sell

x: a house

Question 5

intangible factors

Answer 5

one you cannot touch directly, but people value it

X: beauty of a sunset

(it is harder to measure economically)

Question 6

what is public services functions

Answer 6

• services ecosystems provide to humans and the environment

x: plants cleaning air, food

Question 7

Economists refers to the systems that provides public services functions as…

Answer 7

Natural capital

Question 8

example of public service functions of nature

Answer 8

pollinators

Question 9

in general, public functions of living things are estimated at in the us to do how much work in dollars?

Answer 9

3 trillion to 33 trillion dollars in benefit to humans and the environment

Question 10

necessary conditions for markets to produce efficient allocations and maximizes welfare

Answer 10

1. Markets exist for all goods and services produced and consumed.
2. All markets are perfectly competitive.
3. All transactors have perfect information.
4. Private property rights are fully assigned in all resources and commodities.
5. No externalities exist.
6. All goods and services are private goods. That is, there are no public goods.
7. All agents are maximizers.

Question 11

what causes market failure?

Answer 11

• An economy may be inefficient for the existence of:
• Market Power
• Ex: monopoly
• Public Goods
• Externalities
• Asymmetric information…

Question 12

what are externalities

Answer 12

“Costs or benefits that don ́t show up in the price tag”

• The uncompensated impact of one person’s actions on the well-being of a
  bystander
• Market failure

Question 13

different types of externalities

Answer 13

negative and positive

Question 14

negative externality

Answer 14

Impact on the bystander is adverse

example: air and water pollution

Question 15

positive externality

Answer 15

Impact on the bystander is beneficial

Question 16

example: Production of nickle

Answer 16

◼Private costs include:

Purchasing ore
Energy to run the smelter
Building the plant
Paying employees

◼Externalities include:

Degradation of the environment from plant
emissions

Question 17

positive externalities

Answer 17

• Education
• Benefit of education private
• Externalities: better government, lower crime rate, higher productivity and wages
• Social value – demand
• Higher than private value
• Social value curve
• Above demand curve

Question 18

graph about negative externality

Answer 18

In the presence of a negative externality, such as pollution, the social cost of the good exceeds the private cost. The optimal quantity, QOPTIMUM, is therefore smaller than the
equilibrium quantity, QMARKET

Question 19

graph about positive externality

Answer 19

In the presence of a positive externality, the social value
of the good exceeds the private value. The optimal
quantity, QOPTIMUM, is therefore larger than the equilibrium quantity, QMARKET

Question 20

solve this negative external problem:

Need to get public to value clean air and other environmental benefits as
greater than zero

Answer 20

Possible solution-

Quantitative evaluation of the tangible natural
resources

Air, water, forests, and minerals

Question 21

solve this negative external problem:

Who should bare the burden of these environmental and ecological
costs?

Answer 21

possible solutions:

Include it in costs of production through taxation or fees

Costs could be shared by the entire society and paid for by general taxation

Question 22

what does the “polluter pays” approach provide?

Answer 22

much stronger incentives for cost-effective pollution reduction

Question 23

excludability

Answer 23

property of a good whereby a person can be prevented from using it

x: a car

Question 24

Rivalry in consumption

Answer 24

property of a good whereby one persons use diminishes other peoples use

x: if you eat an apple then another person can not eat that same apple

Question 25

the different kinds of goods

Answer 25

Private goods

Public goods

Common resources

Club goods

Question 26

public goods

Answer 26

not excludable and not rival in consumption

Markets cannot supply public goods at all.

This follows from their non-excludability characteristic.

The supply of public goods is (part of) the business of government.

The existence of public goods is one of the reasons why there is a role for government in economic activity

Question 27

free rider

Answer 27

person who recieves the benefit of a good but avoids paying for it

Question 28

the free rider problem

Answer 28

Public goods. not excludable

prevents the private market from supplying the goods

Question 29

how can the government remedy the free rider problem ?

Answer 29

• If total benefits of a public good exceeds its costs
• Provide the public good
• Pay for it with tax revenue
• Make everyone better off

Question 30

The provision of public goods

Answer 30

As a consequence of the characteristic of non rivalry in consumption,
the value of each unit of the good is given by the sum of the valuation
of all individuals consuming the good.

An efficient provision of public goods requires the sum of the marginal valuations of all individuals to be equal to the marginal cost of the good.

Question 31

Common resources are:

Answer 31

not excludable and rival in consumption

A commons is any resource owned publicly with public access for
private uses

Question 32

Examples of commons in nature

Answer 32

fisheries
fish and whales
deeo ocean seabed
antarctica and actic sea ice
the atmoshpere

Question 33

how is recreation a problem of the commons?

Answer 33

overcrowding of beaches, national parks, wilderness areas and other nature- recreation areas

Question 34

what is the tragedy of the commons

Answer 34

When a resource is shared, an individual’s personal share of profit from
exploitation of the resource is usually greater than that individual’s share of
the resulting loss

Question 35

how can the governments potentially solve the problem

Answer 35

Monitoring role: regulation or taxes to reduce consumption of the
common resource

Government can assume ownership (reserve areas, restricted use)

Turn the common resource into a private good (property rights).