Week 1- Intro

Question 1

Classic Definition of Economics

Answer 1

study of how scarce resource are allocated among competing uses to best satisfy the wants of people

Question 2

People/Gov make tradeoffs…..

Answer 2

between resources that don’t conventionally have monetary value

e. g reducing C emissions: cost to economy vs. ecosystem services of entire planet
e. g driver safety: expenditure on highways

Question 3

Total Economic Value

Answer 3

Use Value

• Option Value
• Direct use value
  - Extractive values
  - Non-extrative values
• Indirect use values

Non-use values

• Bequest Value
• Existence Value

Question 4

Non-extractive values e.g

Answer 4

tourism

Question 5

Option Value e.g

Answer 5

Benefit that arises from conservation of biodiversity, giving the option to utilise those resources in the future.

Question 6

Indirect Use Values e.g

Answer 6

Stringybark forest: Carbon sequestration potential

we don’t get a direct personal benefit, indirectly benefit though carbon being sequestered

Question 7

Economics analysis vs financial analysis

Answer 7

Economic analysis aims to account for societal benefit and costs of project

Question 8

Tradeoffs between…

Answer 8

efficiency & equity

Question 9

efficiency

Answer 9

Maximise outputs for given inputs

difficult to measure because doesn’t account for all costs & benefits

Question 10

equity

Answer 10

people getting what they need
(subjective due to differing views)
-economics has little to say about equity

Question 11

Positive statements:

Answer 11

Describing economic behaviour without judgement

e.g timber harvesting restrictions raise the market price

Question 12

Normative statements:

Answer 12

Arguments of equity

e.g Aus gov should reintroduce carbon tax

Question 13

Natural resource & Environmental economics

Answer 13

Natural resource Econ —> Economy —> environmental econ

Question 14

Natural resource economics

Answer 14

flow of natural resources into economy (extractive and non-extractive)

Question 15

Environmental economics

Answer 15

flow of residuals back into natural world

Question 16

Natural resources types

Answer 16

1. Renewable: Biological, flow or fund resources

2. Non-renewable

Question 17

Biological resource

Answer 17

animals, plants. Renewable if harvested wisely

potentially degrading resource

Question 18

Flow resource

Answer 18

wind, sun, water - unlimited consumption

Question 19

Fund resource

Answer 19

storage e.g dams/ solar battery

Question 20

Market Price

Answer 20

reflects relative scarcity

Question 21

Exclusive & Rivalrous

Answer 21

Private property

Question 22

Non-exclusive & non-rivalrous

Answer 22

Pure Public Good (e.g air)

Question 23

Non-rivalrous & exclusive

Answer 23

Crown

Question 24

Rivalrous & non-exclusive

Answer 24

Open access (e.g open access fisheries)

Question 25

John Rawls - A Theory of Justice (1971)

Answer 25

political philosophy:
Put all people from all generations behind a veil of Ignorance…. would decide that all natural and human-made resources are shared exactly equally

Question 26

Production Possibility Frontiers (description and curve)

Answer 26

A great way of describing production vs environment tradeoffs to be sustainable:

• A certain amount of market goods consumption determines the environmental quality.
• Current generations may be able to consume a certain amount of goods for a certain level of environmental quality
• If future generations would like the same level of environmental quality, production will have to be lowered substantially.
  (e. g GBR)

Question 27

Opportunity cost

Answer 27

cost of something given up: best alternative foregone

e.g waking up to go to lecture sacrifices sleeping

Question 28

Marginal Benefit

Answer 28

additional benefit that arises from a small change in an existing plan (e.g if you are in the front of a squad to capture a wanted man, you have the marginal benefit of capturing him first and getting bounty)

Question 29

Marginal Cost

Answer 29

additional cost that arises from a small change in an existing plan (e.g if you are in the front of a squad to capture a wanted man, you have the marginal cost of getting killed)

Question 30

Equi-marginal principle

Answer 30

‘scarce resources should be allocated to a particular use until the marginal benefit (MB) of allocating another unit to that use equals the marginal benefit that could be gained by allocating the additional unit of that resource to the next best alternative use’ (e.g koala conservation vs. fuel reduction treatments….. the most efficient spending is when MB of each use is the same [equi-marginal] when looking at table)

Question 31

The opportunity cost of clearing a forest to expand the area of farmland includes

Answer 31

• foregone timber revenues

- loss of wildlife habitat

Question 32

air we breathe is an example of

Answer 32

a public good (non-rivalrous and non-exludable)

Question 33

Draw: Australian banana market when a cyclone damages banana plantations in north queensland

Answer 33

• Due to a loss of crops, the cost of production is distributed over fewer bananas.
  The cost of production increases, therefore the supply curve shifts up to the left.