Enviro Econ Principles

Question 1

Demand (marginal benefit curve)

Answer 1

Consumers desire to purchase goods and services at given prices. Demand curve tells the marginal cost of consumption

Question 2

Supply (marginal cost curve)

Answer 2

The total amount of a specific good or service that’s available to consumers. Supply curve tells the marginal cost of production

Question 3

Marginal cost

Answer 3

The cost added by producing one additional unit of a product or service

Question 4

Marginal benefit

Answer 4

Additional benefit arising from a unit increase in a particular activity

Question 5

Equilibrium

Answer 5

Point of efficiency. No externalities

Question 6

Producer surplus

Answer 6

The difference between how much a person would be willing to accept for a given quantity of a good vs how much they can receive by selling the good at the market price. Area above the supply curve and below the market price

Question 7

Consumer surplus

Answer 7

The difference between how much a person would be wtp for a given quantity of a good vs how much they must pay for the good at the market price. Area under demand curve and above the market price

Question 8

Externalities

Answer 8

Source of market failure. Exist whenever the welfare of some agent depends not only on their actions but also on the actions of others under the control of some other agent

Question 9

Negative externalities

Answer 9

An activity imposes costs on a 3rd party

Question 10

Positive externality

Answer 10

An activity imposes benefit on a 3rd party

Question 11

Pecuniary externalities

Answer 11

When the actions of an economic agent cause an increase or decrease in market prices

Question 12

Pigouvian tax

Answer 12

Polluter pays. Per unit tax set to = the damage caused by the activity. External costs are paid directly by the polluting agent. Arthur pigou 1920

Question 13

Property rights

Answer 13

A bundle of entitlements defining the owners rights, privileges and limitations for the use of a resource

Question 14

Universality

Answer 14

All resources are owned by someone

Question 15

Transferability

Answer 15

Property rights should be transferred to others

Question 16

Exclusivity

Answer 16

All the benefits and costs should only accrue to the only

Question 17

Enforceability

Answer 17

Property rights should be secure from seizure or encroachment

Question 18

Scarcity rent

Answer 18

The producer surplus persists in the long run competitive equilibrium

Question 19

Private property regimes

Answer 19

Individuals hold entitlements

Question 20

State run property regimes

Answer 20

Government own and control property

Question 21

Common property regimes

Answer 21

Property is jointly owned and managed by a specific group

Question 22

Common pool resources

Answer 22

Characterized by non exclusivity and divisibility

Question 23

The class theorem

Answer 23

When negotiation costs are negligible and affected parties can freely negotiate, the entitlement can be allocated by the courts to either party and an efficient allocation will result. Only the distribution of costs and benefits amoung the effective parties is changed

Question 24

Efficient level of diversity

Answer 24

The efficient allocation max’s economic surplus, which is represented geometrically by the portion of the area under the market demand curve that lies above the constant marginal cost curve. The allocation that max’s economic surplus is Q*, the allocation where the demand curve meets the marginal cost curve

Question 25

Free rider effect

Answer 25

Someone who derives the value from a commodity without paying and efficient amount for its supply

Question 26

Monopoly

Answer 26

When product is sold by a single seller. Supplies too little of a good at too high a price. At the monopoly output, marginal benefits are greater than marginal costs. Net benefits aren’t max’d and there’s a deadweight loss

Question 27

Cartel

Answer 27

Group of producers who form a collusive agreement to gain monopoly power

Question 28

Rent seeking

Answer 28

The use of resources in lobbying and other activities directed at securing protective legislation

Question 29

Positional goods

Answer 29

Goods and services that people value bc of their limited supply, and bc they convey a high relative standing within society

Question 30

Fixed input

Answer 30

An input where it’s quantity can’t be readily changed when market conditions indicate that an immediate change is desirable

Question 31

Variable input

Answer 31

An input where it’s quantity can be changed almost instantaneously in response to desired changes in output

Question 32

Short run

Answer 32

That period during which 1 or more of the productive factors of production is fixed

Question 33

Long run

Answer 33

That period of time in which all inputs can be changed

Question 34

Production function

Answer 34

Schedule showing the max Amount of output that can be produced from any set of inputs given an existing tech. Output =f(labour, capital, land, mgmt)

Question 35

Marginal physical product

Answer 35

Change in output divided by the change in input use.

Question 36

Average physical product

Answer 36

Level of output devoured by the level of input use

Question 37

Total fixed costs

Answer 37

Costs don’t vary with the level of output or input use. This is a short run concept bc all costs are considered variable in the long run

Question 38

Total variable costs

Answer 38

Sun of all individual categories of production costs that do vary with the level of output or input use

Question 39

Marginal cost

Answer 39

Change in total cost divided by the change in output

Question 40

Average variable cost

Answer 40

Total variable cost divided by output

Question 41

Average total cost

Answer 41

Total cost divided by output