Exam 2 Vocabulary

Question 1

Coase-Theorem

Answer 1

private bargaining will overcome negative externalities without the need for government intervention, as long as there are no transactional costs and property rights are fully allocated regardless of the distribution of property rights among affected parties.

Question 2

Pigouvian Tax

Answer 2

(market based policy) - a tax on pollution equal to the marginal damage at the socially efficient level of output

Question 3

Cost Effectiveness

Answer 3

for a set level of pollution reduction the cost-effective policy is the one that achieves this at lowest cost

Question 4

Marginal User Cost

Answer 4

an extra cost of extracting non renewable resources that represents the opportunity cost of foregoing future consumption

Question 5

Quota

Answer 5

a limit or the quantity or value of a good that can be imported, exported, or taken

Question 6

Sustainability (Solow’s Lecture)

Answer 6

an obligation to leave future generations with the capacity to be as well off as the current generation.

Question 7

Discount Rate

Question 8

Steady State

Answer 8

what happens in a fishery in long run equilibrium. In the steady state nothing changes meaning the fish population does not change.

Question 9

Emission Tax

Answer 9

with an emission tax the firm will abate up to the point where the marginal costs of abatement equal the tax