Env Eco Final Exam

Question 1

Use a supply and demand graph to show how the elasticity of supply affects price when food demand increases. Would we expect prices to increase more if the elasticity of supply is high or low?

Answer 1

Elastic supply - D increases from D1 -> D2. little to no price increase.

More inelastic supply - D increases from D2 to D3 supplies have less ability to reduce the Q of food they supply when the price increase.

More inelastic, changes in price.

LOOK AT GRAPH

Question 2

How does the discount rate affect the amount of soil erosion? Will an economically optimal decision necessarily be ecologically sustainable?

Answer 2

with a high discount rate the benefits of erosion control do not justify the loss in revenue. the economic optimum: continue erosive practices, but this is certainly not econologially sustainable. The armer will leave the degraded land for not generation. This pressure farmers to maximize short -term revenues.

If the discount rater was lower, than the benefits of erosion control would exceed the lost revenue and make erosion control economically beneficial.

must offer low interest loans to make erosion control more attractive to farmers

Question 3

Draw a diagram showing the typical nonrenewable resource use profile over time. Include the path for resource prices and consumption. Identify the four stages and briefly discuss what is happening to price and consumption in each stage.

Answer 3

DIAGRAM OF FOUR STAGES

THERE ARE TWO DIAGRAMS

Stage 1 - Price decreases and extraction increases for a resource stock exploited over time. (high quality, supply abundant)

Stage 2 - Prices are stable, D(demand) increases for the resource and extraction is still increasing. (resource continues to be exploited)

Stage 3 - Prices increase, extraction “appears” constant, tech advances and new resources discovered but resource is still scarce.

Stage 4 - prices increase exponentially toward choke price to reduce quality demanded. (choke - where demand falls to zero.)

Question 4

Draw a graph showing how an industry determines its optimal rate of recycling, showing the marginal cost of recycled materials, the marginal private cost of virgin resource extraction, and the marginal social cost of virgin resource extraction. Then, use the graph to discuss why the firm will tend to recycle less than is socially optimal.

Answer 4

IAGRAM WITH MCR AND MC AND MCV

it increases reliance on recycled materials as long as MSC of virgin materials is lower. you read the graph from right to left

Question 5

What is the difference between a stable and an unstable equilibrium for the population of a fishery? Use a graph to support your answer. Where does the maximum sustained yield occur in your graph?

Answer 5

DIAGRAM FISH POP

If between Xmin and MSY at XL we can increase market by letting fish regenerate self into MSY. hold back if between MSY and xmas we can over harvest to get back to level.

Question 6

Use a graph with a total cost curve and a total revenue curve for a fishery to show the difference between the economically optimal harvest, the maximum sustained yield, and the open-access equilibrium.

Answer 6

DIAGRAM FISHING EFFORT

Question 7

Explain how a timber company can determine whether to clear cut a forest plot or practice sustainable forestry. What variables will they take into account?

Answer 7

what physical amount, MP, revenue from clear out forest, rate of growth sustainable forest, extract just growth rate, discount rate to clc PV of forest management scheme.

Discount rate - must know what stock of timber to determine present value plus longer clear cut.

Question 8

How will a change in the discount rate affect the optimal harvest period of forest plots? Use a graph to support your answer.

Answer 8

only extract during optimal rotation period

optimal harvest period diff based on discount rate

increase profit level at extracting at over time if we value future as much as we value the present

Question 9

List and describe three possible ways for increasing freshwater supplies. What are the limitations of each option?

Answer 9

aquifers-Underground, recharge via seepage, but we’ve been extracting at a rate faster than recharge rates.will likely be depleted in the next 40-60 years. In the US, the Ogallala Aquifer is also severely depleted and irrigation has begun to shrink as a result. Northern China and India are experiencing similar issues.

• 2)dams- capture seasonal floodwater (which would otherwise be unattainable for human use), provide hydroelectric power, and irrigation. They provide 19% of the world’s energy. 48,000 damsworldwide, about half in China. Also, they are affected by the problem of Siltation and new Dam proposals are criticized for their environmental and social damages due to flooding. Dams reduce fish populations, lower crop production, disrupt the flow of nutrients needed for water health, and contribute to global warming.
• 3) desalination- the removal of salt from ocean water to make it usable for irrigation, industrial, or municipal water supplies. Potential to provide an unlimited supply of water.Cost is a barrier, as removing salt from seawater requires large amounts of energy.

Question 10

Discuss why eliminating water subsidies would increase water conservation and improve overall social welfare. Use a supply and demand graph to support your answer.

Answer 10

DIAGRAM

At market equilibrium are benefits of Area A losses at Area B , social loss when water subsidized we increase the dead weight loss

QD in excess to QS

Question 11

Use a supply and demand graph to demonstrate how free trade can increase welfare without the existence of externalities. Then, include externalities and illustrate why free trade may or may not actually increase welfare.

Answer 11

TWO DIAGRAMS

open for trade gains from trade when not externalities

surplus goes to produce if importing country what will effect be of timber (first diagram)

Gain in welfare when open tot race negative externalities of production we lose extra benefit , we dont know if F is bigger than H, we dont know what is gained or last, ambiguous

Gained area F and G , thee in negative externality of social loss of area A + G (net increase in social welfare (f + g) negative externality

Question 12

What is a “steady-state” economy? Use a graph to support your answer. What would a steady-state economy impose limits on? How could society continue to develop with a steady-state economy?

Answer 12

DIAGRAM

Not halting all economic can grow in areas not dependent on resources, but resources that can renew itself.

growth should follow level output in growth, bring to level at consumption of natural resources. trying to limit total throughput, wanna reach steady state of resource as we pursue economic activity so its sustainable.

Question 13

How does the elasticity of supply affect food prices?

Answer 13

When the elasticity of supply is high, the demand increases with no significant upward pressure on price. With inelastic supply, there is a rise in demand that causes a sharp upward move in price.

Question 14

What is a crop value index? How can it be used to determine how land will be allocated among various crops?

Answer 14

It is an index indication the relative value of production of different crops on a given quantity of land. It represents that marginal revenue product of the land, which is the marginal physical product multiplied by the price of the crop.

Question 15

What is information asymmetry and why is it relevant to pesticide use?

Answer 15

It is a situation in which different agents in a market have different knowledge or access to information. This is a characteristic of pesticide regulation. Producers and government regulations may not be aware of the nature of the dangers of pesticide use.

Question 16

What factors would characterize a sustainable agricultural system?

Answer 16

This would require a combination of government policy and market incentives. This would include the prices of fertilizer, pesticides, irrigation water, and energy. Many governments have policies that directly or indirectly subsidize these prices. Certain subsidies need to be made in order to incentive agricultural production policies. Carrying capacity must also be considered.

Question 17

What policies might encourage sustainable agriculture?

Answer 17

Policies that manipulate subsidies and price inputs will help encourage sustainable agriculture. Policies to subsidize energy also promote the trend to this type of agriculture.

Question 18

What are the three reasons that economic supplies of resources change over time?

Answer 18

The three main reasons are, the resource is extracted and used over time, diminishing reserves, the new resources deposits are discovered over time, increasing reserves, the changing price and technological conditions can make more or less of the known resources economically viable.

Question 19

what are the different classifications of nonrenewable resources?

Answer 19

The classifications of nonrenewable resources are identified reserves, demonstrated reserves, inferred reserves, and hypothetical and speculative reserves.

Question 20

What is assumed with an exponential reserve index?

Answer 20

This assumes that consumption will grow exponentially over time, leading to more rapid resource exhaustion.

Question 21

Why have predictions that nonrenewable resources would be depleted failed to occur?

Answer 21

Reserves have grown with new discoveries and new extractive technologies.

Question 22

How do scarcity rents affect firm decision-making on resources?

Answer 22

They affect because they are payments to resource owners in excess of the amount necessary to keep those resources in production.

Question 23

What is a choke price?

Answer 23

A choke price is the minimum price on a demand curve where the quantity demanded equals zero.

Question 24

What three factors contributed to the expansion of global nonrenewable resource consumption through the 20th century?

Answer 24

The three factors that contributed to the expansion of global nonrenewable resource consumption were continual resource discovery, improved resource extraction technology, resource substitution, such as the use of plastics in place of metals.

Question 25

What is a backstop resource?

Answer 25

It is a substitute resource that becomes a viable alternative after the price of the initial resource reaches a certain high price.

Question 26

How does the inclusion of environmental costs affect the optimal recycling rate?

Answer 26

Inclusion of environmental benefits of metal recycling are significant, economic factors often result in recycling rates that re below optimal levels.

Question 27

What does sustainable management of a renewable resource involve?

Answer 27

This requires maintaining the resources source and sink functions. In a way that its quality and availability remain stable over time.

Question 28

What is the maximum sustainable yield of a renewable resource?

Answer 28

No more of a resource should be harvested or withdrawn annually than can be regenerated or replenished by the natural processes of resource cycling and solar energy.

Question 29

What is the difference between a stable and unstable equilibrium?

Answer 29

A stable equilibrium is xmax. In a natural state (without intensive industrial level over extraction by humans), the pop will approach this equilibrium. An unstable equilibrium is Xmin. At this fish population level, slight increases in the population will set the species on the road to recovering its population, while a slight decrease means fish head toward extinction.

Question 30

What is the current status of the world’s fisheries in terms of fishing effort and catch?

Answer 30

The more fishing effort increases the more yields are going to decrease because we’re depleting the overall fish stock faster than it can regenerate fish on its own.

Question 31

What are individual transferable quotas (ITQ’s)?

Answer 31

These are tradable rights to harvest a resource, such as a permit to harvest a particular quantity of fish.

Question 32

Why is the discount rate important in determining whether a private owner will clear cut timber or practice sustainable forestry?

Answer 32

Discount rate is the annual rate at which future benefits or costs are discounted relative to current benefits or costs. This determines the present value of the sustainable management alternative. As the discount rate increases, the present value of the sustainable management alternative is reduced.

Question 33

What is a mean annual increment?

Answer 33

It is the average growth rate of a forest; obtained by dividing the total weight of timber by the age of the forest.

Question 34

Is timber management for maximum sustained yield ecologically optimal?

Answer 34

It may not be compatible with ecosystem sustainability. Forest managers can maintain sustainable yield merely by replanting all logged areas with a single species of fast-growing tree.

Question 35

In what ways does water combine elements of renewable and non-renewable resource analysis?

Answer 35

It is a natural resource that forms the basis of life on earth. Water can be characterized as a renewable resource, since it can generally be reused indefinitely as long as it is not severely polluted. It is still available in limited supply although it is considered a renewable resource.

Question 36

Which economic sector has the largest water withdrawals?

Answer 36

Agricultural sector.

Question 37

Why is average-cost pricing unlikely to result in efficient use of water?

Answer 37

Average cost is simply the total supply cost divided by the number of units supplied.

Question 38

What are some institutions for managing water as a common property resource?

Answer 38

The World Bank and International financial institutions still promote privatization, but community opposition has pushed policy in the opposite direction.

Question 39

What is the basic principle of comparative advantage in international trade?

Answer 39

Comparative advantage: the theory that trade benefits both parties by allowing each trading partner to specialize in goods that it can produce with relative efficiency. Holds that trade is beneficial, increases efficiency, and increases wealth for trading countries. Both countries can consume more than they could without trade.

Question 40

How can externalities be incorporate into the basic theory of international trade?

Answer 40

Production Externalities: externalities associated with the production of a good or service, such as emissions of pollutants from a factory. Consumption Externalities: externalities associated with the consumption of a good, such as pollutant from vehicles.

Question 41

What is the process and production methods (PPM) rule?

Answer 41

Process & Production methods (PPM) rule: if a country fails to act to protect its own environment, other countries have no trade leverage to promote better environmental practices. Removes an important potential weapon for international environmental protection.

Question 42

What is scale, composition, and technique effects?

Answer 42

Scale: trade promotes growth (increased scale)
Composition: trade changes industrial patterns
Technique: trade improves in technological efficiency

Question 43

What is sustainable development? What are its three major dimensions?

Answer 43

It is development that meets the needs of the present without compromising the ability of the future generations to meet their own needs. The three major dimensions are social equity, environmental resilience, and economic sufficiency.

Question 44

What are the different implications of sustainable development for developed and developing countries?

Answer 44

Developed countries typically have large capital stocks and extensive infrastructure including power plants, highways, factories, extensive urban business, dams, irrigation systems and more elements. Developing countries have problems in achieving sustainability. They start from much lower income levels, their major social and economic goal is to increase production. The combination of increased population and economic growth creates strong pressure for rising resource use and increased generation of waste and pollution.

Question 45

What is the difference between a “brown agenda” and a “green agenda”?

Answer 45

The brown agenda would be considered pollution management while the green agenda is natural resource conservation which includes forest management, integrated pest management, watershed rehab and more.

Question 46

What are some of the implications of sustainable development in agriculture?

Answer 46

There is a reliance on local knowledge and participatory input into the development of farming systems. On the consumption side, there will be resource limitations on production and this will need population growth limits and greater food distribution.

Question 47

What are some of the implications for resource and energy use?

Answer 47

It will be necessary to accomplish a transition away from fossil fuels well before 2050. This system would have to be adapted to local conditions using solar, wind, and other renewable energy sources.

Question 48

What is the difference between strong and weak sustainability? What are the implications of each for sustainable development?

Answer 48

Strong sustainability is the view that natural and humanmade capital are generally not substitutable and, therefore, natural capital levels should be maintained. Weak sustainability is the view that natural capital depletion is justified as long as it is compensated for with increases in human made capital, assumes that human made capital can substitute for most types of natural capital. This requires changes in the standard conception of economic growth.

Question 49

What is a “steady-state” economy?

Answer 49

This is an economic that maintains a constant level of natural capital by limiting the throughput of material and energy resources.