Question 1

Briefly define the following :
-option value

Accepted Answer

The value people place on the option to use a resource in the future.

Question 2

Briefly define the following :
-primary standards for air quality

Accepted Answer

Standards designed to protect the public health.

Question 3

Briefly define the following :
-precautionary polluter pays principle

Accepted Answer

Polluters post a bond large enough to cover the worst-case scenario for environmental damage.

Question 4

Briefly define the following :
-perfect price discrimination

Accepted Answer

The answer of Briefly define the following :
-perfect price discrimination...

Question 5

Suppose you own a t-shirt factory that can save money by illegally dumping dye into a nearby river rather than disposing of it safely. If you illegally dump the dye, there is a 10% chance that it will cause minor environmental damage for which you will have to pay a $10 million fine. There is also a 15% chance that it will cause health damage to citizens for which you will have to pay a $100 million fine.
a. What is the expected value of the amount you will have to pay in fines? ________
Show your work.
b. If you would be willing to pay $20 million for insurance that would cover the cost of these fines if imposed, what is your risk burden associated with illegal dumping? _________
c. Is this firm risk loving, risk neutral, or risk averse (circle one).

Accepted Answer

The answer of Suppose you own a t-shirt factory that...

Question 6

Suppose a small island economy uses its resources to produce mangos and national parks for tourism. What shape would you expect this economy's production possibilities curve to have? _________________ Explain why.
If this economy is producing on its production possibilities frontier, but it is not producing the socially optimal combination of goods:
a) What type of efficiency is this economy definitely achieving? _____________________
b) What type of efficiency is this economy definitely not achieving? ____________________

Accepted Answer

The answer of Suppose a small island economy uses its...

Question 7

Suppose Econarctica penguins live for two periods. In the first period of their life the penguins are young and they reproduce with a total fertility rate of 1. In the second period of their life they are old and they do not reproduce. The old penguins die and the young penguins' eggs hatch in between one period and the next. Assume half of each generation is female. In Period 1 there are 4 young penguins and 8 old penguins. How many penguins will be alive two periods later, in Period 3? _____
Please show your work.

Accepted Answer

The answer of Suppose Econarctica penguins live for two periods....

Question 8

Market prices are more accurate measures of the value received from products when demand curves are

Accepted Answer

The answer of Market prices are more accurate measures of...

Question 9

According to which model is social welfare maximized when assistance is pri?oritized for species that provide the greatest additional benefit per dollar spent on protection.

Accepted Answer

The Noah's Ark model prioritizes the protection of species that are most beneficial to humans or the ecosystem as a whole. This model proposes that resources should be spent on protection of species that provide the greatest additional benefit per dollar spent on protection, which ultimately maximizes social welfare.

Question 10

Which of the following is particularly vulnerable to starting-point bias?

Accepted Answer

Contingent valuation method (CVM) is particularly vulnerable to starting-point bias. Starting-point bias occurs when respondents' answer choices are influenced by the initial amount presented to them. In CVM, respondents are asked to state the maximum amount they are willing to pay for a certain product or service, and the initial amount presented can influence their response.

Question 11

A stated intent of energy deregulation was to

Accepted Answer

Energy deregulation was implemented to increase competition among energy providers, with the hopes that this would ultimately benefit consumers by lowering prices and providing more choice in energy sources. Increasing prices to allow energy providers to make fair profits was not a stated goal of deregulation. The other choices are unrelated to the intent of energy deregulation.

Question 12

The environmental Kuznets curve suggest that to reduce pollution we should

Accepted Answer

The environmental Kuznets curve suggests that as income per capita increases, environmental degradation first increases but then decreases after reaching a certain level of income. Therefore, making income per capita very high is associated with reduced pollution as societies can afford cleaner technologies and value environmental quality more.

Question 13

Which of the following is the most likely to prevent Coasian solutions from solving externality problems?

Accepted Answer

Asymmetric information can prevent Coasian solutions from solving externality problems because the parties involved may not have access to the same information, which can lead to challenges in negotiating and reaching an agreement. In contrast, a single source or victim of an externality, a lack of transaction costs, and an externality that takes effect immediately can all potentially be addressed through Coasian bargaining.

Question 14

According to the textbook, shortages, such as the shortage of food that Thomas Malthus predicted would cause starvation, can be reduced or avoided by all of the following EXCEPT

Accepted Answer

While new discoveries, technological improvements, the market mechanism, and advancements in exploration for new supplies can all contribute to reducing or avoiding shortages, lower prices alone cannot necessarily address a shortage. Lower prices may increase demand for a product, exacerbating a shortage rather than alleviating it.

Question 15

The optimal level of pollution is

Accepted Answer

The optimal level of pollution is found where the marginal cost of pollution equals the marginal benefit. This is because at this point, the net benefit of pollution is maximized, which is the goal of achieving the optimal level of pollution. Option A is not feasible as there will always be some level of pollution. Option B is not accurate as there may be cases where the total cost of pollution is greater than the total benefit, making it an unfavorable situation. Option D is incorrect because the marginal benefit of pollution is unlikely to be maximized at any point, as pollution has negative externalities. Option E is incorrect as all levels of pollution have some effect on the environment.

Question 16

Which of these solutions to the tragedy of the commons did Hardin advocate?

Accepted Answer

Hardin advocated for privatization as a solution to the tragedy of the commons, arguing that individuals would have a greater incentive to protect private property and resources than they would to protect commonly held resources. This would allow for better management and stewardship of resources.

Question 17

Which of the following is not a source of market failure?

Accepted Answer

Multiple firms selling identical products is not a source of market failure, as it represents perfect competition, which theoretically leads to efficient outcomes. The other options listed (imperfect competition, imperfect information, public goods, and externalities) can all cause market failures by leading to suboptimal outcomes in terms of efficiency, equity, or both.

Question 18

Light, noise, and heat are provided in the reading as examples of what type of pollutant?

Accepted Answer

Light, noise, and heat are examples of pollutants that fall under the category of "flow" pollutants, which are released continuously or intermittently over time from numerous sources.

Question 19

a. If someone doesn't care about future generations, does this makes their rate of time preference (discount rate) higher or lower (circle one)?
b. If you are willing to accept no less than $1200 in one year in exchange for providing a loan of $1000 now, what is your discount rate? ________
c. For someone with a discount rate of 15%, what is the present value of saving wildlife that would be worth $500 million in 120 years? ________ Show your work

Accepted Answer

The answer of a. If someone doesn't care about future...

Question 20

Suppose the LNG Inc. company wants to build three pipelines that would carry fuels under your city. The pipelines pose risks of groundwater contamination and explosion. For each pipeline the table below shows the marginal benefit to LNG Inc. and the marginal cost of expected damages to residents (in millions of dollars).
 $$\begin{array} { c c c c c } 
\text { Pipelines } & \begin{array} { c } 
\text { Total Profits } \
\text { for LNG Inc. }
\end{array} & \begin{array} { c } 
\text { Total Damage to } \
\text { Residents }
\end{array} & \begin{array} { c } 
\text { Marginal Benefit } \
\text { (added profits) }
\end{array} & \begin{array} { c } 
\text { Marginal Cost } \
\text { (added damages) }
\end{array} \
\hline \hline 0 & 0 & 0 & 0 & 0 \
1 & - & - &120 & 55 \
2 & - & - & 80 & 75 \
3 & - & -& 70 & 125
\end{array}$$ a. Fill in the blanks in the table.
b. What is the efficient number of pipelines? _____________
c. Suppose that LNG Inc. is entitled under the injunctive remedy. What is the range of offers (in millions of dollars) that the residents might make and LNG Inc. might accept to eliminate the third pipeline? Between __________ and ___________.
d. If residents are entitled under the damages remedy, at the level of output selected by LNG Inc., what is the total amount of compensation LNG Inc. will provide to the residents? _____________

Accepted Answer

The answer of Suppose the LNG Inc. company wants to...

Quiz 1: Environmental Economics and Natural Resource Management

Briefly define the following : -option value

Briefly define the following : -primary standards for air quality

Briefly define the following : -precautionary polluter pays principle

Briefly define the following : -perfect price discrimination