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ECON FINAL! > Econ 423 Final > Flashcards

Econ 423 Final Flashcards

1
Q

Maximum sustainable yield (MSY)

A

The highest rate of harvest H that can be sustained by a fishery occurs where the growth rate of the fishery stock is at its maximum.

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2
Q

What happens if the rate of extraction of fish is higher than MSY?

A

The fishery collapses

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3
Q

What are the two outcomes of fish stocks if the rate of extraction is set in MSY?

A
  1. ) if it wasn’t calculated correctly, the fishery collapses
  2. ) the fishery stays at sustainable fishing.
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4
Q

What is the best method for maximizing the stock of fish?

A

Setting the harvest rate less than the MSY because if the calculations are off, the fishery will collapse.

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5
Q

What is the best way to regulate MSY?

A
  1. ) set Total Allowable Catch (TAC) to maximum sustainable yield or below
  2. ) set quotas for harvest rate
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6
Q

Individual quotas (MSY)

A

Individual fisher persons own a certain amount of TAC

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7
Q

Vessel quotas

A

Vessels allocated some of the TAC

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8
Q

Community quota

A

Shares of TAC allocated to community

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9
Q

Name 3 reasons that cost/benefit analysis is controversial

A
  1. ) puts monetary value on invaluable things
  2. ) prioritizes present over future
  3. ) easily manipulated
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10
Q

What is the purpose of cost benefit anal (CBA)

A

To figure out which policy has the maximum net benefit to society.

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11
Q

What is the purpose of establishing a baseline for CBA?

A

To see if the alternative generates a greater monetary net benefit

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12
Q

How does CBA relate to kaldor hicks efficiency?

A

Kaldor Hicks= greatest net benefit to society

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13
Q

How does CBA relate to consumer/producer surplus?

A

Come back to this tomorrow

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14
Q

What is willingness to pay?

A

The amount people are willing to pay for environmental benefit, such as keeping wolves in Yellowstone. Usually discovered through surveys.

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15
Q

What is willingness to accept?

A

The amount consumers are willing to forego to accept absence of environmental benefit. Ex not have wolves in Yellowstone. Should coincide with WTP, but usually doesn’t.

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16
Q

How does willingness to pay (WTP) and willingness to accept (WTA) influence cost benefit anal (CBA)?

A

They are used to measure CBA in regards to the environment.

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17
Q

How are costs and benefits that occur over time accounted for in BCA?

A

Measured by taking present value (PV) of the streak of net social benefits over the relevant time horizon.

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18
Q

Why is choosing the correct discount rate so important for CBA?

A

Minor miscalculations can have a dramatic effect on accuracy, especially with longer time horizons.

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19
Q

Why is discount rate controversial?

A

The higher the discount rate, the more we discount future payments, thus the more difficult it is for environmentally friendly investments to pay for themselves over a given time horizon.

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20
Q

What are the 3 primary components of the discount rate?

A
  1. ) opportunity cost of capital
  2. ) social rate of time preference
  3. ) use value
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21
Q

What is contingent valuation?

A

Stated preference approach that involves the use of survey questionnaires to elicit hypothetical willingness to pay information.
Ex: WTP to avoid ecosystem damages associated with Exxon Valdez oil spill.

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22
Q

Why is contingent valuation controversial?

A

It’s based on hypothetical survey responses rather than the actual value.

23
Q

name three ways to find benefits that do not have a market price?

A
  1. ) surveys
  2. ) travel cost method
  3. ) hedonic regression method
24
Q

Why does starting anal in production rather than exchange result in seeing economic classes and class conflict?

A

It leads to the conclusion that the system is fair and certain people don’t work hard enough. It favors those already better off.

25
Q

What is M-C-M?

A

Money-commodity-money
Capitalists make the decisions.
In this system money is the most important institution

26
Q

Why is viewing our economy from M-C-M conception important for understanding growth?

A

It allows us to understand capitalism (perspective of those who make decisions)

27
Q

What is the goal of M-C-M?

A

More money!!!

28
Q

What role does class play in Richard Smith’s analysis of Jared Diamonds book Collapse?

A 
Everything—no one is free to make their own decisions. He is critical of Diamond’s lack of class acknowledgment. Sometimes people don’t have a choice in environmental decisions. We are trapped in producer/consumer demand. 
Richard=anticapitalist.
29
Q

According to Richard Smith, even though Easter Island society collapsed, why did those societies not have a choice in their collapse?

A

Because the slaves clearly had no choice, and if the chiefs didn’t keep building stone heads, they would lose their place as chief.

30
Q

What does Foraster recommend for solving the problems of unemployment and environmental destruction?

A

Green job programs that offer employment to anyone willing and able to work that can’t find a conventional job.

31
Q

What role does planned obsolescence play in capitalism?

A

Intentionally shortening the lifespan of products to increase consumer demand=increased capitalist growth.

32
Q

Why is planned obsolescence a contradiction to sustainability?

A

It increases use of raw materials for the sake of capital growth.

33
Q

Understand rational choice model for deterrence

A

It is rational to commit a crime if economic gains > expected penalty.
Many economists argue that the penalty should be equal to economic gain from polluting.

34
Q

How can we tell is someone is risk averse?

A

They don’t commit the act in fear that it will give them disutility

35
Q

How can we tell if someone is risk neutral?

A

If they are indifferent to committing the act.

Expected penalty=economic gain

36
Q

How can we tell if someone is risky?

A

They commit the act despite posibity of penalty— dump waste in river.

37
Q

Why is having a Philosophy of the State important for compliance and deterrence?

A

It is not enough to assume that if we make a good argument or if majority wants something that the government will implement the policy.

38
Q

What is incentive regulation?

A

It influences behavior through incentives. Ex raise the price of cigs so kids don’t smoke, rather than outright banning them.

39
Q

What is the point of incentive based regulation?

A

The point is to get people to behave a certain way without forcing their behavior.

40
Q

What is command and control regulation?

A

Government regulations that state that you can only participate in the market if you are compliant with specific regulations.

41
Q

What are the two types of command and control regulation? Which is cheaper?

A

1.) technology based standards
2.) performance-based standards.
Performance based standards are cheaper.

42
Q

Technology based standards (command and control regulation)

A

Mandates certain production technologies or equipment that firms must use.
Example: cars must have seat belts.

43
Q

Performance based standards (command and control regulation)

A

Mandate uniform control targets for all regulated firms, but unlike tech-based, firms are given some choice over how target is met.
Example: CAFE standards.

44
Q

Name two problems with command and control?

A
  1. ) once in place there isn’t incentive to further advance technology.
  2. ) higher costs
45
Q

Name an advantage from command and control?

A

Generally easier to implement/less complex.

46
Q

How do market based regulations work?

A

Uses market signals to get people to behave: make things scarce.

47
Q

How does cap and trade work?

A

It implements an emissions cap with tradable emissions allowances. Makes allowed emissions scarce.

48
Q

Why is cap and trade promoted as the best method for solving climate change?

A

C&T has been proven to be successful in the EPA’s Acid Rain Program. It generates environmental improvements while reducing compliance costs.

49
Q

Why is cap and trade promotes as more efficient than command and control?

A

It’s cheaper

50
Q

2 Advantages of C&T

A

Incentives for tech advance

Internalizes negative externalities.

51
Q

2 problems with cap and trade

A
  1. ) When emissions are not uniformly mixed it can lead to areas that have purchased allowances to avoid environmental clean up.
  2. ) It creates a financial market for avoidance permits.
52
Q

What are advantages/disadvantages of C&T program vs pollution tax?

A

Pollution tax advantages:
Greater certainty than C&T regarding price of pollution emissions
Relatively simple

Pollution tax disadvantages:
Less certainty regarding quantity of emissions reduction.
More controversial in politics.

53
Q

What is the Jevons paradox?

A

Tech advances that are supposed to be sustainable ultimately lead to an increase in emissions and resource extraction.

ECON FINAL! (1 decks)

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