national security

Question 1

why is oil a national security problem

Answer 1

vulnerable strategic import have cost which is not reflected in the market
national security is a public good

Question 2

embargo

Answer 2

short run: too small q and too high p

long run: economic efficient point

Question 3

should we be self sufficient

Answer 3

no
vulnerability premium is less than the cost of self-sufficiency because embargo are uncertain and we have strategic reserves

Question 4

policy alternatives

Answer 4

impact demand, domestic supply, or foreign supply

Question 5

tax consumption

Answer 5

conservation or tax consumption

shift demand curve down to bring q to efficient point

Question 6

subsidize domestic production

Answer 6

shift supply curve down

increases domestic quantity

Question 7

tariff on imports

Answer 7

equal to the distance between Sf and Sw
tariff rate x quantity imported
price and quantity correct

Question 8

quota on imports

Answer 8

price and quantity correct

box to importers (q2, q4, Sw, Pw)

Question 9

OPEC’s 4 hypothesis

Answer 9

monopoly - cartel theory
dominant firm
non-profit maximizing model
competitive model

Question 10

monopoly - cartel theory

Answer 10

assumes OPEC members collude to excursive power over production and price
economic inefficiency
deplete too slow

typical monopoly supply/demand graph

Question 11

can a cartel survive?

Answer 11

why its not:
price elasticity 
income elasticity 
non-cartel members
compatibility of members interests 

if it is a cartel, it breaks apart often

Question 12

dominant firm theory

Answer 12

fringe acts as price takers
dominant firm takes into account the fringe
residual demand- demand the dominant firm faces after it takes out the supply of the fringe
market demand- fringes supply
competitive fringe supply= horizontal summation

find price: where MC = MR, go up to residual demand and got horizontal across to price

Question 13

non profit maximizing model theory

Answer 13

OPEC are not profit maximizers, they make production decisions based on their national budgets which are a function of their absorptive capacities

Question 14

competitive model

Answer 14

OPEC is an unsuccessful cartel and behaves in an essentially competitive fashion

Question 15

non economic political club

Answer 15

political benefits between members

Question 16

nuclear and renewable energy benefits

Answer 16

electricity/power 
deceased pollution: decrease carbon or are carbon neutral and decrease waste 
sustainable 
jobs/economic
reduced dependence on fossil fuels

Question 17

nuclear power - non renewable

Answer 17

up to 60000 year supply at present rates

Question 18

nuclear power costs

Answer 18

long time lag between planning and operation
cost more expensive than wind
weapons proliferation risk
meltdown risk
mining lung cancer risk and other mining issues
carbon-equivalent emissions and air pollution associated with mining and refining
waste risk perception and other

Question 19

storage options for nuclear waste

Answer 19

spent fuel pool or dry cast
best option:
Yucca Mountain
$15 billion spent - still not in operation

Question 20

future costs with Yucca Mountain

Answer 20

US govt is contracted to pay $23 billion to private utility companies
each year the govt fails to implement a long term storage solution costs them $500 million

Question 21

risks with Yucca Mountain

Answer 21

must be designed to leak .15MSV of radiation per year per person
this is 1% of a CT scan
potential transportation accident

Question 22

why no solution for Yucca Mountain

Answer 22

shut down 2010

NIMBY

Question 23

hydropower initial cost

Answer 23

initially expensive

• cost of building
• green house gas emissions from building
• most of good sites already used or protected - raises cost to go to a poor site

Question 24

hydropower environmental cost

Answer 24

flooding large tracts of land
methane
habitat
coastal erosion
animal - primarily fish
reservoir can also change natural water temperatures, water chemistry, river flow characteristics, and silt loads all of which effect ecology
GHG such as CO2 and methane form in natural aquatic systems and in human-made water storage reservoirs as a result of the aerobic and anaerobic decomposition of biomass in the water

Question 25

solar power costs

Answer 25

5 - 11 times more expensive to produce electricity from the sun than it is from coal, hydropower, or nuclear source although costs are decreasing
- technology is expensive
- energy production only takes pace when sun is shining
- 20-40% efficiency
- maintenance costs
large inexpensive tracts of lands are found far from cities where power is needed
may not be the most profitable use of the land
transmission from solar farm to cities
aesthetic pollution
hazardous waste when decommissioned

Question 26

wind power costs

Answer 26

decreasing over time
energy production only takes place when windy and some places are not windy enough to be cost competitive
large inexpensive tracts of lands are found far from cities where power is needed
may not be the most profitable use of the land
transmission from wind farm to cities
impacts local wildlife- bats and birds
like all energy sources, wind projects can alter the habitat
waste disposal turbines

Question 27

biomass power costs

Answer 27

may be more expensive than traditional plants
may be more carbon neutral but does not decrease carbon
may not be the most profitable use of land
use of land to produce fuel stock and not food
seasonality of biomass stock
burning wastes could create high concentrations of metals