chapters 1-4

Question 1

pollution

Answer 1

negative externality = “imposes a cost on people who are ‘external’ to the producer or consumer of the product.”

Question 2

internalizing the externalities

Answer 2

if polluters were forced to compensate victims, the resources would no longer be underpriced

Question 3

open access problem

Answer 3

if people weigh private benefits against private costs, they will overexploit common resources when given open access = tragedy of the commons

Question 4

resource rents

Answer 4

long run profits, generated by restricted access to natural capital (only small amount gain access)
can be collected in form of tax and used to reimburse those who lose out in the process of regulating and loosing access

Question 5

public good problem

Answer 5

1. free riding = people benefit from the public goods regardless of whether or not they pay for them
2. high transactions = public good provision require groups of people to undertake action. this can be expensive

==> need gov to control

Question 6

three levels of cost-savings

Answer 6

1. risk reduction = firms that pro-actively reduce pollution and reduce the risk of facing regulations, legal liabilities, and negative consumer reactions
2. resource savings = using water, energy, and raw materials more efficiently reduces emissions and saves money
3. culture of innovation = firms that make environemtal problem-solving part of their buisness

Question 7

pareto-efficient situation

Answer 7

a situation in which it is impossible to make one person better off without making anyone else worst off

Question 8

efficient outcome

Answer 8

net monetary benefits produced by the economy are maximized

Question 9

efficient pollution levels

Answer 9

= marginal benefits of pollution reduction equal the marginal costs of pollution reduction
= total benefits exceed total costs

Question 10

marginal analysis

Answer 10

examining the additional or incremental benefits and costs of a specific action or unit

Question 11

marginal unit

Answer 11

last unit of pollution added

Question 12

marginal cost

Answer 12

costs of reducing that unit

Question 13

marginal benefits

Answer 13

benefits from reducing that unit

Question 14

marginal graph values

Answer 14

bc marginals represent changes in total values as we move from one unit to the next, it is conventional to graph marginal values between the units on the X axis

Question 15

marginal curves

Answer 15

change in the total curves

Question 16

social welfare function

Answer 16

used to assess different social outcomes –> measure overall well-being

Question 17

the coase theorem

Answer 17

if polluters and victims can bargain easily and effectively, private negotiations should arrive at the efficient outcome regardless of who has the original right to pollute or prevent pollution
limitations: free riding + transaction costs
==> DOESN’T RLY HAPPEN

Question 18

global warming

Answer 18

long-term increase in Earth’s average surface temperatue due to the accumulation of greenhouse gases in the atmosphere

Question 19

positive feedback

Answer 19

process that amplifies initial warming effect
= ex: global warming = more clouds = more global warming

Question 20

negative feedback

Answer 20

changing temperatures decelerate warming
= ex: cloud coverage lead to reducing amount of radiation entering earth’s atmosphere

Question 21

economic costs

Answer 21

financial costs associated with environmental issues (taxes, health care, agriculture). exclued ethical considerations such as fairness and the protection of rights

Question 22

benefits vs costs

Answer 22

assigning a dollar value to things and evaluating. measurable monetary benefits need to b greater than measurable monetary costs

Question 23

utilitarianism

Answer 23

environment’s value lies in its contribution to the happiness and well-being of present and futur generations and people

Question 24

four economic questions about global warming

Answer 24

1. How much pollution is too much?
2. Is the gov up to the job?
3. How can we do better?
4. Can we resolve global issues?

Question 25

3 solutions to how much is too much

Answer 25

1. efficient standard = benefit-cost
2. safety standard = reduce pollution to “safe” level (people have a right to healthy protection)
3. sustainability standard = protect natural ecosystem (increase consumption does not come at expense of other = future generations)

Question 26

2 obstacles gov face

Answer 26

1. imperfect info
2. opportunity for political influence

Question 27

conservative vs progressive

Answer 27

conservative: no gov bc gov only for gov interest
progressive: gov can serve general interest. but, unequal distribution of wealth and power

Question 28

2 solutions to how can we do better

Answer 28

1. incentive-based regulation
2. promotion of clean tech

Question 29

cap-and-trade

Answer 29

setting a limit on the total amount of CO2 emissions allowed
- rich countries can purchase emission allowances from poorer countries that have surplus allowances or have reduced their emissions below the allocated cap
- countries want to sell their surplus to invest in clean tech

Question 30

utility function

Answer 30

relationship between consumption of goods and an individual’s happiness
Usomeone = #tomatoes, #DVDs etc
–> what has biggest weight????
–> if we add pollution to equation, it decreases

Question 31

social welfare function

Answer 31

sum of individual utility function
measure overall well-being

Question 32

assumption of equal marginal utility

Answer 32

assume that we all get the same value in increase in consumption
–> is that true??