Env. Econ Final

Question 1

What is Ecological Economics

Answer 1

Views the economy as a subsystem of Earth’s ecosystem, emphasizing the importance of sustainability and resilience. (Input-Output analysis & Thermoeconomics)

Question 2

What is Environmental Economics

Answer 2

Focuses more on analyzing market-based solutions and economic incentives to address specific environmental issues.

Question 3

What are Property Rights ?

Answer 3

Refer to a bundle of
entitlements defining the owner’s rights, privileges, and limitations for use of the resource

Question 4

What are the three characteristics of efficient property right structures ?

Answer 4

Exclusivity, Transferability, Enforceability

Question 5

What is Exclusivity ?

Answer 5

All benefits and costs accrued as a result of owning and using the resources
should accrue to the owner, and only to the owner, either directly or indirectly by sale to
others

Question 6

What is Transferability ?

Answer 6

All property rights should be transferable from one owner to another in
a voluntary exchange

Question 7

What is Enforceability ?

Answer 7

Property rights should be secure from involuntary seizure or encroachment
by others

Question 8

What is an externality ?

Answer 8

whenever the welfare of some
agent, either a firm or household, depends not only on his or her activities, but also on activities under the control of some other agent

Question 8

What is a positive externality?

Answer 8

This occurs when the benefits of an economic activity spill over to third parties who did not participate in the activity.

Question 9

What is a deadweight loss ?

Answer 9

Whenever marginal social costs are not equal
to marginal social benefits

Question 10

What is a negative externality?

Answer 10

This occurs when the costs of an economic activity spill over to third parties who did not participate in the activity.

Question 11

Government Failure as a source of inefficiency

Answer 11

Sometimes governments
act without full information and establish policies that are ultimately very inefficient. For
example, some time ago, one technological strategy chosen by the government to control motor vehicle pollution involved adding a chemical substance (MTBE) to gasoline. Designed to promote cleaner combustion, this additive turned out to create a substantial water pollution problem.

Question 12

What is the Coase Theorem?

Answer 12

An economic idea that suggests that if property rights are well-defined and transaction costs are low, private individuals can negotiate and solve externalities (such as pollution) without government intervention.

Question 13

Legislative and Executive Regulation

Answer 13

They can regulate outputs, inputs, production processes, emissions, and even the location of production in their attempt to produce an efficient outcome

Question 14

Examples of Legislative and Executive Regulation

Answer 14

The legislature could dictate that no one produce more
steel or pollution than Q*. (Backed up my Jail or Fines)

The legislature could impose a tax on steel or on pollution. A per-unit tax equal to the vertical distance between the two marginal cost curves would work.

Question 15

Present Value Approach

Answer 15

The present value approach is particularly useful for comparing the value of cash flows occurring at different points in time, helping decision-makers assess the attractiveness of investment projects.

Question 16

Treatment of Risk

Answer 16

This approach assesses the potential risks and uncertainties associated with a particular policy by considering the expected present value of its net benefits. This helps decision-makers evaluate the overall impact and feasibility of the policy, taking into account potential gains and losses over time.

Question 17

The Importance of the Discount Rate

Answer 17

the desirability of strong current action is dependent (at least in part) on the size of the discount rate used in the analysis. Higher discount rates reduce the present value of future benefits from current investments in abatement, implying a smaller marginal benefit

Question 18

Should Humans place an economic value of the environment ?

Answer 18

The controversy lies in how these values are derived. Deep ecologists advocate for minimal human intervention, asserting that economic valuation lacks a moral basis and contributes little to environmental management. On the other hand, proponents of economic valuation argue that it can demonstrate when environmental degradation is senseless, even from a limited anthropocentric perspective, and can guide policy decisions.

Question 19

What is a stated preference method ?

Answer 19

Using surveys to find out how much people are willing to pay for a small improvement or to avoid a small loss.

Question 20

What is Contingent Valuation?

Answer 20

The simplest version of this approach merely asks respondents what they would be willing to pay for a change in environmental quality (such as an improvement in wetlands or reduced exposure to pollution) or on preserving the resource in its current state.

Question 21

What is a Choice Experiment ?

Answer 21

Presents respondents with a set of options. Each set
consists of various levels of attributes or characteristics of the good. Each choice set typically includes the status
quo bundle which includes a price of $0 since it represents no change.

Question 22

What are the biases associated with contingent valuation ?

Answer 22

Strategic bias

Information bias

Starting-point bias

Hypothetical bias,

Payment vehicle bias (protest bids)

The observed discrepancy between willingness
to pay (WTP) and willingness to accept (WTA)

Question 23

What is Strategic bias ?

Answer 23

When the respondent intentionally provides a biased answer in order to
influence a particular outcome

Question 24

What is Information bias?

Answer 24

Whenever respondents are forced to value attributes with which they have little or no experience

Question 25

What is Starting-Point bias ?

Answer 25

In those survey instruments in which a respondent is asked to
check off their WTP from a predefined range of possibilities. How that range is defined by the designer of the survey may affect the resulting answers.

Question 26

What is Hypothetical bias ?

Answer 26

When the respondent is being confronted by a contrived, rather than an actual, set of choices. Since he or she will not actually have to pay the estimated value, the respondent may treat the survey casually, providing ill-considered answers.

Question 27

What is Payment vehicle bias ?

Answer 27

If a respondent is averse to taxes or has a negative perception of the agency collecting the (hypothetical) payment, they may state $0 for their willingness to pay.

Question 28

What is the observed discrepancy between willingness to pay and willingness to accept bias ?

Question 29

What are Averting Expenditures ?

Answer 29

those designed to reduce the
damage caused by pollution by taking some kind of averting or defensive action. Examples include installing indoor air purifiers in response to an influx of polluted air or relying on bottled water as a response to the pollution of local drinking water supplies.

Question 30

Dynamic Efficiency in Two Periods

Answer 30

It considers both the benefits we enjoy today and those we can enjoy in the future. Essentially, it’s about making the most out of the resource while ensuring that there’s enough left for the well-being of future generations.

Question 31

Fossil Fuels: NS Considerations

Answer 31

Hence, leaving the determination of the appropriate balance between imports and domestic production to the market generally results in an excessive dependence on
imports in terms of both climate change and national security considerations

Question 32

Different types of recycling costs

Answer 32

Transportation Costs - The scrap must be transported to the processing facility and the processed scrap to the market.

Energy Costs - recycling
offers significant energy savings over production from raw materials

Processing Costs - production process can produce its own environmental consequences, compliance with environmental regulations
can add to the cost of recycled input.

Labor Costs - Collecting, sorting, and processing scrap is typically very labor intensive

Question 33

Should the United States Promote Wind Power?

Answer 33

Pros:
1. Renewable energy source
2. No greenhouse gas emissions

Cons:
1. Destructive to wildlife (birds, bats)
2. Eye-sore
3. Environmental costs concentrated on a relatively small number of people

Opposition to wind power is strong.

Question 34

The economics of land allocation

Answer 34

In general, as with other resources, markets tend to allocate land to its highest-valued use, as reflected by the users’ willingness to pay or willingness to accept payment.

Question 35

What are Stock Pollutants?

Answer 35

Pollutants for which the environment has little or no absorptive capacity.

Question 35

What are Fund Pollutants?

Answer 35

Pollutants for which the environment has some absorptive capacity.

Question 36

An example of a Fund Pollutants

Answer 36

Ex. Carbon Dioxide is absorbed by plant life and oceans

Question 37

An example of a Stock Pollutant

Answer 37

Ex. nonbiodegradable bottles tossed by the roadside.

Question 38

What is an Emissions Charge?

Answer 38

A fee, collected by the government, levied on each unit of pollutant emitted into the air or water.

Question 39

What is a Cap-and Trade ?

Answer 39

A form of emissions trading where the government specifies a cap on emissions and allocates allowances to emission sources, either by gifting or auctioning, based upon this cap. These allowances are freely transferable among sources. Distinguished from the earlier credit form of emissions trading.