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NR Econ > EXAM 1 > Flashcards

EXAM 1 Flashcards

1
Q

rent

A

in situ value of a resoruce

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2
Q

rent seeking

A

efforts made by ppl to gain property rights over resourecs

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3
Q

what is nature in econ

A

provides stocks of natural capital
when combined with other inputs, produces goods and services

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4
Q

extractive use

A

removing from environment

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5
Q

non extractive use

A

using without removal

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6
Q

forests extractive uses

A

timber

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7
Q

forest non extractive use

A

recreation
flood control
co2 seq
biodiversity

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8
Q

fisheries extractive uses

A

food products

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9
Q

fisheries non extractive uses

A

rec
biodiversity

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10
Q

non use values

A

existence, option, bequest, stewardship

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11
Q

existence value

A

value of knowing that something beautiful or unique exists, whether or not you’re going to use it

value of knowing that the amazon rainforest exists

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12
Q

option value

A

value placed on having the ability to use something in the future

option of seeing the amazon rainforest

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13
Q

bequest value

A

value of leaving environemntal amenities for future generations of people

value of preserving amazon for children

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14
Q

stewardship value

A

value attached to a moral obligation to preserve environmental amenities

we should not cut down amazon

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15
Q

what is the value of a good or service

A

what a person is willing and able to pay to obtian the good or service

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16
Q

is willingness based on preference

A

yes

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17
Q

TF an individuals willingness to pay is always constrained by their willingness to pay

A

t

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18
Q

marginal willingness to pay WTP

A

amt of money a person is willing and able to pay to obtain an additional unit of the good

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19
Q

total WTP

A

amt of money a person is willing and able to pay for some units of a good

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20
Q

how do you get total WTP

A

summing up Marginal WTP

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21
Q

look at figure 1
what is the total willingness to pay for 3 units

A

81

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22
Q

look at figure 1
what is the marginal willingness to pay for 3 units

A

17

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23
Q

what does the area under the curve mean in figure 2

A

total willingness to pay

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24
Q

what is marginal willingness to pay in figure 3

A

height of curve at 3

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25
Q

diminishing marginal WTP

A

the more a person has consumed of a good, the less they are willing to pay for an additional unit

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26
Q

increasing total wtp

A

pay more for greater quantities of a good
prefers to have more of a good

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27
Q

on figure three why would the consumer not purchase more or less than 3 units

A

if marginal value of consumption is greater than the cost of purchasing theh good, the person will purchase additional units

the marginal value of consuming the 4th unit is less than the cost of purchasing the fourth unit

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28
Q

looking at figure 3, how much does the person pay for the good

A

3x17=51$

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29
Q

how much is this person willing to pay for three units of the good?

A

a+b

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30
Q

why might people have different marginal WTP

A

different preferences, different ability to pay

if same perosn: diff time or diff information

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31
Q

you get aggregate curves from different individuals tf

A

t

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32
Q

what is a public good

A

a shared good

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33
Q

is a persons enjoyment of a pure public good diminished by others consuming the good

A

no

ex. species preservation

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34
Q

what is aggregate demand for pure public goods

A

the vertical summation of individual demand curves

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35
Q

what is the aggregate demand for private goods

A

the horizontal summation of individual demand curves

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36
Q

what is the benefit that a person gets from something

A

what they are willing to pay for it, even though they may not have to

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37
Q

look at fig 4. what is the total WTP for G1 units

A

area a

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38
Q

fig 4. what is the total benefit that she recieves form consuming G1 units of the good

A

area a

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39
Q

fig 4. what is her total wtp for g2 units

A

area a+b

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40
Q

fig 4 what is the total benefit of consuming G2 units of the good

A

area a+b

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41
Q

fig 4 what is her wtp to increase her consumption from G1 to G2 units

A

b

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42
Q

cost

A

a forgone benefit

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43
Q

fig 4 what is the cost from going from G2 to G1 units

A

area b

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44
Q

fig 5. Two ppl a and b. the G is a pure public good.

What is the aggregate benefit of increasing from G1 to G2

A

2a+b

A= a
B= a+b

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45
Q

thinking about sequences of decisions over time and how to value these decisions

A

discounting

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46
Q

thinking about consumers willingness to pay for the sequence of consumptions of quantities

A

discounting

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47
Q

how to compare values that occur over time

A

dicsounting

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48
Q

converting future values to present values

A

discounting

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49
Q

is the benefit reciveved in the future the same as the benefit now?

A

no must discount

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50
Q

discount rate for present value. you recieve 100$ 1 yr from now. discount rate is 5%

A

present value = (future value) / (1 + discount rate)^time

x= (100) / (1+0.5) = 95.24

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51
Q

for discount rate larger time =

A

larger denominator =smaller present value

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52
Q

reasons for discounting future benefits and costs

A

CAN’T COMPARE BENEFITS AND COSTS AT UNEQUAL TIMES
1. capital market interest rates

  1. personal time preference
  2. discounting for future risk
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53
Q

nominal interest rates

A

observed rates

54
Q

real interest rates

A

rates discounted by general inflation

55
Q

TF the more impatient you are the higher the value you place on a benefit recieved in the future

A

F, lower value if more impatient

56
Q

what is the present value for the sequence of payments in fig 6 if the discount rate is 4%

A

552.02

57
Q

what are the two costs when producing a good

A

direct and opportunity costs

58
Q

direct costs

A

need certian productive inputs liek labor, machinery, and raw material

costs of production includes what is paid to purchase these inputs

59
Q

opportunity cost

A

value of something in its next most valueble use

example: being in classes opportunity cost is working

60
Q

what is it called when theres a divergence in the firms private costs of production and the social costs of production

A

external cost

61
Q

what is a negative externality

A

activity of some agent causes a loss to another without consent and without compensation

62
Q

external cost

A

loss from negative externality

63
Q

is climate change an externality problem

A

yes nc its global, long term, and uncertian

64
Q

marginal cost

A

change in total cost resulting in one unit change in output

65
Q

total cost

A

cost of producing some number of units of output

66
Q

characteristic of increading total cost

A

costing more to produce a higher level of output

67
Q

characteristic of increasing marginal cost

A

higher output = higher cost to produce more

68
Q

do all industries have increasing marginal costs

A

no

69
Q

technology def

A

collection of knowledge underlying the methods and machinery used to turn inputs into outputs

70
Q

what is the basic effect of technological change

A

lower the cost of producing something

71
Q

in fig 7, which is the marginal cost before technology vs after

A

MC1 is before MC2 is after

72
Q

what is the reduction of total cost of producing q* in fig 7 when going from mc1 to mc 2

A

area a

73
Q

a good or service is perfectly competitive when __

A

no firm can affect the price of output

74
Q

what do firms do when they are perfectly competitive

A

choose its level of output so that the market prive is equal to its marginal cost

this means that the firms marginal cost function will tell us how much output it will supply for every possible prive

75
Q

in fig 8. what is total revenue

A

area a+b

76
Q

in fig 8 what is total cost

A

area b

77
Q

in fig 8 what is the profit

A

area a

78
Q

in fig 9 why doesn’t the firm produce more than q1 when the prive of its output is p1?

A

it would cost the firm more to prod the extra output than the price it gets for it in the market

79
Q

aggregate supply

A

the horizontal summation of individual form supply curves

you get this from individual ppl

80
Q

how is a decision statically efficient

A

if it maximizes the difference between the social benefits of the decision and its social costs in a single time period

81
Q

MSC

A

marginal social cost

82
Q

MSB

A

marginal social benefit

83
Q

in fig 10, what is the efficient quantity of output

A

where lines intersect, q*

84
Q

in fig 10 what is the total social beenfit of q*

A

a+b

85
Q

in fig 10 what is the total cost of q*

A

b

86
Q

in fig 10 what is the net social benefit of q*

A

a

87
Q

in fig 11why isny q1 efficient instead of q*

A

net social benefit is lower at q1 instead of q*

88
Q

fig 11 total social benefit of q1

A

a+b+d

89
Q

fig 11 total social cost of q1

A

b+d+c

90
Q

net social benefit of q1 fig 11

A

a-c

91
Q

dynamic efficiency (intertemporal)

A

including all future costs and benefits

92
Q

dynamic efficiency requires that a series of decisions________

A

maximizes the present value of the stream of net benefits

93
Q

examples of how output will effect social benefits and costs

A

harvests from fisheries affects fish stocks in future

and timber

94
Q

equation for present vlaue of net benefits

A

= net benefits in year zero + sum of the present values of all future net benefits

95
Q

dynamic efficiency requires that we consider both ____

A

current net benefits of a decision and the effect of this decision on the present value of all future payoffs

96
Q

marginal net benefit =

A

MCB - MCC - MUC

97
Q

MCB

A

marginal current benefit

98
Q

MUC definitino

A

marginal user cost

captures marginal effect on the present value of future net benefits from a decision made today

99
Q

MUC can benefit if

A

A decision today increases future discounted net benefits

example: thinning a forest can increase the amount of marketable timber available in the future

100
Q

if a decision about q0 has no effect on the future, what does MUC =

A

0

101
Q

why are MCC and MUC added together (graphs)

A

todays output decision has present and future costs

102
Q

resource rent

A

the value of a resource over and above what it costs to extract, process, and sell it

103
Q

in situ pricce

A

value in nature

104
Q

the in situ price of a resoruce is its (rent related)

A

marginal rent

105
Q

if harvesting has a negative effect on the population, the MUC will bring the MCC in the positive or negative direction

A

positive, higher cost

106
Q

fig 12 shows lobsters. what is the marginal lobster rent

A

.70, difference in y values

107
Q

fig 12 shows lobsters. what is the total rent

A

.7 x 1.8 million (rectangle) = 1.26 million

108
Q

is the marginal resoruce rent = marginal user cost when

A

efficient resource markets. if value differs then the market is inefficent

109
Q

increasing production will do what to marginal resoruce rent

A

decrease it, no consideration for future

110
Q

definition of dynamic efficiency

A

maximizing the present valye of the stream of net benefits

requires a discount rate

111
Q

what does a postivie discount rate mean

A

shift benefits to the rpesent and costs to the future

112
Q

are discount rates a social choice

A

yes

113
Q

what are factors that go into the choice of discount rates

A

rates of discount determined in existing capital markets

uncertianty abt distant future

to what extend is it appropriate to discount the future net beenfits of ppl who don’t have vote in decision

114
Q

sustainable development

A

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

115
Q

human welfare is based on production using two kinds of capital

A

Nat resource capital
built capital

116
Q

natural resoruce capital

A

specific natural resoruces and natural systems

fisheries, forests, water, ecossytems

117
Q

built capital

A

human capital, produced capital

education, buildings, infastrcture

118
Q

weak sustainability definition

A

value of TOTAL stock shouldn’t decline over time

individual components may decline in value if offset by increase in value of other components

119
Q

weak sustainability, could cutting down a forest be replaced with a building and be weak sustainable

A

yes

120
Q

does weak sustainability require that we sustain or preserve any particular natural resource

A

no

121
Q

what does weak sustainability mean

A

natural resource capital and built capital are perfect substitutes in the production of human welfare

122
Q

hartwick rule

A

allow efficient depletion of natural resources and invest the resulting natural resource rent in another capital to maintain the value of the total stock

how to deplete a resource sustainably

123
Q

strong sustainability

A

sustainabiltiy requires that we maintian the value of the remaining stock of natural resource capital

maintian vlaue of capital, but now focus is on the value of the natural resource capital stock

124
Q

weak and strong sustainability focus on maintaining _____

A

value

125
Q

does strong sustainability allow you to substitute among different forms of capital

A

NO, substitution is weak sustainability

125
Q

environmental sustainability

A

obligation to maintian physical flows of specific resources for future generations

126
Q

problems with environmental sustainability

A

do we have to maintain all antural resources

what abt nonrenewable resources

how do we account for future production technologies and the preferences for future ppl

127
Q

should you convert land for palm oil drilling

A

if the benefits outweigh the costs (if its efficient)

128
Q

palm oil example of weak strong and envi sustainability

A

weak- if conversion doesnt reduce the value of the total capital stock. If value of flow of beenfits from preserved rainforest if offset by values of palm production

strong- same as weak because natural asset is being coverted into another natural asset

envi- dont convert bc natural resource is being depleted

129
Q
A

NR Econ (3 decks)

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