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Environmental Economics > EXAM 1 > Flashcards

EXAM 1 Flashcards

1
Q

What is economics the study of

A

the allocation of scarce resources among competing ends

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2
Q

frontier economy

A

the idea that there is an endless supply of resources

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3
Q

spaceship economy

A

the idea that resources are limited and you must plan ahead

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4
Q

do limits on the availability of natural resources and the environment constrain economic growth

A

No

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5
Q

What is a pessimistic view of environmental economics and its impact on growth

A

that resources will run out and lead to economic collapse, one must halt economic growth to conserve the environment

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6
Q

What is a optimistic view of environmental economics and its impact on growth

A

greater conservation, education, and investments in innovation will save the economy from collapse

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7
Q

What is sustainable development

A

development that meets the needs of the present without compromising the ability of the future generations to meet their own needs

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8
Q

what is the capital approach to sustainable development

A

environment treated as a form of natural capital

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9
Q

how does “weak” sustainability differ from “strong” sustainability?

A

though they both treat environment as natural capital, weak sustainability is replacing the depleted natural capital with physical or human capital, while strong says the types of capital are non substitutable

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10
Q

provide two reasons why it’s so challenging for low-income economies to achieve sustainable economic development

A
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11
Q

explain the concept of environmental Kuznets curve, and craw on a diagram

A

an inverted U-shaped relationship between a variety of indicators of resource depletion or pollution and per capita income

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12
Q

what determines an individual’s WTP?

A

an individual’s income, knowledge and experience, and tastes and preferences

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13
Q

what causes the Demand curves to be steeper? and what causes it to shif tout?

A

the more necessary an item is, the steeper the demand will be. The demand will shift with a total change of WTF, like an increase of income

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14
Q

what determines a firm’s costs of production

A

the company itself and the market – how expensive the resources needed to produce are + some more

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15
Q

what causes the S curves to be steeper? and what causes it to shift out?

A

the steeper an s curve, the less adjusted to the market & the more expensive production costs. It shifts when theres a shortage/increase or abundance/decrease in price for materials or the implementation of new tech

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16
Q

define the efficient allocation of production at the market level

A

the interaction between producers na consumers in the market will lead to an optimum solution with an equilibrium price and quantity

16
Q

define the efficient allocation of production at the market level

A

the interaction between producers na consumers in the market will lead to an optimum solution with an equilibrium price and quantity

17
Q

what is the discount equation for present value?

A

PV=FV/(1+i)^n

18
Q

what are the two key characteristics of a public good? and why is it difficult for private firms to provide public goods

A

nonexclusive and nonrival. because it is not defined by ownership

19
Q

why may the private rate of discount differ from the social rate of discount? What are the implications

A

because private rates care less about the future, while social is more concerned about long run stability

20
Q

what do we mean by economic values

A

expression of WTP for an increase or decrease in an environmental good or service - expressed in $

21
Q

what are the pros and cons for putting a dollar value on nature?

A

pros: more efficient allocation, less misuse and overuse; cons: ethical considerations, infinite values

22
Q

What are the components of total economic value? provide an example of each with reference to an ecosystem of your choice

A

direct use value + indirect use value + non-use value

23
Q

what is the CBA rule to determine whether to go ahead with project A or B

A

accept the project with the highest present value net benefits

24
Q

Explain and provide an example of “travel cost” valuation approach. what are the problems?

A

attempts to infer non-market environmental values by using the total travel and time cost that an individual incurs to visit a recreation site. Problems- people could be traveling for other reasons & it cannot indicate changes in environmental quality.

25
Q

Explain and provide an example of “hedonic” valuation approach. what are the problems?

A

infers the value of the environmental good from another related market. Ex. housing market is surrogate for clean air. problems: statistical difficulties, choice of dependant variable, and restrictive assumptions

26
Q

Explain and provide an example of “contingent valuation method” valuation approach. what are the problems?

A

hypothetical method in the absence of markets. surveying people directly to determine WTP. Problems: biases, systematic and hypothetical

27
Q

Explain and provide an example of “valuing the environment as an input” valuation approach. what are the problems?

A

The environment sometimes supports or protects production activities for “free” - which is a positive externality. Ex. pollination by wild bees - supports agriculture. problems: not perfect substitutes

28
Q

Explain and provide an example of “benefits transfer” valuation approach. what are the problems?

A

predicts WTP values for environmental quality or access change at one site based on existing data collected for a similar site. Problems: does not take into account differences in demographics for population and goods

28
Q

Explain and provide an example of “benefits transfer” valuation approach. what are the problems?

A

predicts WTP values for environmental quality or access change at one site based on existing data collected for a similar site. Problems: does not take into account differences in demographics for population and goods

29
Q

what are the 2 steps for correcting misuse and overuse of environmental resources

A

removing policy distortions and internalizing externalities

30
Q

define and illustrate diagrammatically: Coase bargaining solution to correct an environmental externality

A
31
Q

what is the systems approach to sustainable development

A

that everyone in the market is responsible to protect the environment

Environmental Economics (2 decks)

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