AGEC 604 Natural Resource Economics

Size: px
Start display at page:

Download "AGEC 604 Natural Resource Economics"

Transcription

1 AGEC 604 Natural Resource Economics Photos: FreeFoto.com Pollution: General Concepts & Stock Pollutants Pollution Overview Two Questions What is the appropriate level of flow? If reduction is necessary, how should the responsibility for achieving this flow level be allocated among the various sources of the pollutant? Pollutant Taxonomy Absorptive Capacity of the Environment Pollutant Damage Pollutant Accumulation Emissions Load Absorptive Capacity Ability of the environment to absorb or assimilate waste products Pollutants Residuals of production and consumption Stock Pollutant Pollutant for which the environment has little or no absorptive capacity 1

2 Fund Pollutant Taxonomy Cont. Pollutant for which the environment has some absorptive capacity Zone of Influence Horizontal zone Local pollutants damage near the source Regional pollutants damage experienced greater distances from the source Vertical zone Surface pollutants damage caused by concentrations near the earth s surface Global Pollutants damage caused by concentrations in the upper atmosphere Stock Pollutant Efficient Allocation Two Components of a Stock Pollutant Pollutant accumulates in the environment Damage increases as pollutant increases and is persists Nature of Stock Pollutant Interdependency between present and future generations Efficient Allocation Allocation which maximizes the present value of the net benefits from commodity X Benefits - from consuming X Cost production costs plus environmental costs Stock Efficiency 2 Similar to Nonrenewable Resources Nonrenewable Resources Review Extractive costs increase with the cumulative amount of the resource depleted Efficient quantity of the nonrenewable resource extracted and consumed decreases over time and at some point stops 2

3 Stock Pollutant Stock Efficiency 3 Damage costs associated with the pollutant increases with the cumulative amount deposited in the environment Efficient quantity of X decreases as the marginal cost of damage increases Price of X increases reflecting the rising social costs Steady state solution Additions of the pollutant to the environment stops Production of X stops or recycle stock pollutant Technological Progress Stock Efficiency 4 May modify efficient allocation by Reducing the amount of pollutant produced Create ways to recycle pollutants Ways to render the pollutant harmless Increases time to stop using X Key Using nonrenewable resources imposes a cost on future generations by using up the resource A stock pollutant imposes a cost on future generations by the damages caused The Road Continues 3

4 AGEC 604 Natural Resource Economics Pollution: Fund Pollutants Photos: FreeFoto.com Fund Pollutant Efficient Allocation Emissions Rates Rate greater than absorptive capacity stock Rate less than absorptive capacity breaks link Usual Objective Maximize net benefits Equivalent Formulation Minimization of damage costs and control costs Fund Efficiency - 2 marginal costs /unit MC control MC damages Q* quantity of pollution emitted (units) Note: Optimal Level of Pollution is Not Zero Q* depends on the shape of the curves Technology, pollutant, human impacts, location etc. all impact the shape 4

5 Market Allocation Without Intervention Historically Air and water common property resources Overexploited as Waste Repositories Damage caused by pollution is external to the firm Externalities Control cost are not external to the firm Excessive pollution too few resources committed to pollution control Efficient Policy Responses Efficiency Given by Q* MC control = MC damages Requires Knowledge of Both Curves Curves for all sources of emission Very high information requirement Solution Select a specific legal level of pollution based on some other criteria Question How to allocate the responsibility of meeting the pollution level? Cost-Effectiveness Criteria Objective Reduce emissions to a set level at the minimum cost Assumptions Uniformly mixed pollutant Two sources of pollution Want to reduce emissions by B units 5

6 Cost-Effectiveness Criteria MC 1 MC 2 source 1 0 b * 1 B source 2 B b * 2 0 Conclusion quantity of emissions reduced Cost of achieving a given reduction will be minimized if and only if the marginal costs of control are equalized for all emitters Cost-Effectiveness Criteria - 2 MC 1 MC 2 source 1 0 b 1 B source 2 B b 2 0 quantity of emissions reduced Policy Alternatives Emission Standards Emission Charges Transferable Emission Permits 6

7 The Road Continues AGEC 604 Natural Resource Economics Photos: FreeFoto.com Pollution: Policy Alternatives Fund Pollutants Emission Standards Policy Alternatives Emission Charges Transferable Emission Permits 7

8 Emission Standard Emission Standards A legal limit is placed on the amount of pollutant an individual source is allowed to emit Traditional Approach Not likely to be cost-effective Why? Lack of information How to Allocate? Equal reduction for all similar sources Emission Charges Emission Charges Fee is levied on each unit of pollutant emitted Total payment = fee x amount of pollutant emitted Cost c 2 MC of pollution control T c 1 P 1 P T P 2 units of pollution emitted Emission Charges - 2 Cost Effective Allocation Yes all sources will go to the point of MC of control equals the emission charge Appropriate Level of the Emission Charge Level of charge which yields the amount of emissions reduction wanted Trial and error process Set too high Set too low Transitional costs 8

9 Emission Charges - 3 Stimulates Technological Progress Why? Cost MC b MC a T A B P 1 P 2 units of pollution emitted Transferable Emission Permits Transferable Emission Permit System All sources are required to have a permit to emit pollution Permits are freely transferable Agency issues the number of permits necessary to meet the desired level of pollution Cost-Effective Allocation Stimulates Technological Progress MC 1 Permits - 2 source 1 0 P b * 1 B source 2 B B-P b * 2 0 MC 2 C D* D* A quantity of emissions reduced Conclusion Free market equilibrium is the cost-effectiveness solution Basis for current reforms attempts 9

10 Charges vs. Permits Both Rely on Economic Incentives Both Cost-Effective Allocation Charge trial and error procedure to get correct level of pollution Charge gives the MC of pollution control Permits gives the level of pollution MC of control defined by the market Charges vs. Permits - 2 Reaction to External Sources Increase number of sources Charge system increase in pollution Permit system increase in MC of control Inflation in Cost of Control Charge real charge of emissions decreases - lowers control Permit higher permit prices increase in control Growing Economy Permit System is Better? Charges vs. Permits - 3 Cost of Being Wrong Imprecise information on damage and control costs Charges greater certainty about MC of control Permits greater certainty about quantity of emissions Objective Minimize Total Costs Damage costs sensitive to being wrong permits Control costs sensitive to being wrong charges Which is Best? Depends! 10

11 The Road Continues AGEC 604 Natural Resource Economics Pollution: Nonuniformly Mixed Fund Pollutants Photos: FreeFoto.com Nonuniformly Mixed Pollutant Nonuniform Amount of emissions entering the environment plus location of the emitting source determines damages Concentrations at a receptor become the important factor C B Stream R Receptor D A 11

12 Ambient Standards Mixed - 2 Legal ceiling placed on the concentration level of specific pollutants in the air, water, and/or soil Difference from Uniformly Mixed Emissions what can be controlled Concentrations policy target Transfer Coefficients The amount the concentration at the receptor will rise if source i emits one more unit of pollution Mixed - 3 Transfer Coefficients Cont. k r = a 1 E 1 + a 2 E a n E n + B where: a transfer coefficients E emissions B background concentrations Cost Effective Objective Meet a given concentration level at a minimum cost Marginal costs of concentrations reduced will be equal Example - Mixed Emissions Reduced MC of Emissions Concen. Reduced Source 1 a 1 E MC of Concen. Source 1 MC 1 /a Concen. Reduced Source 2 a 2 E MC of Concen. Source 2 MC 2 /a Concen. Concentration with a 1 = 1.0 and a 2 =

13 Similar to Uniform Policy Approaches Work off concentrations at receptors instead of emissions More information is needed transfer coefficients Transferable Ambient Permit System Each permit allows a different amount of pollutant based on location Ambient Charges Charge on emissions weighted by the transfer coefficients 13

AGEC 604 Natural Resource Economics

AGEC 604 Natural Resource Economics AGEC 604 Natural Resource Economics Allocation of Nonrenewable Resources Part I Consumption of Materials in the United States, 1900 1995 By Grecia Matos and Lorie Wagner U.S. Geological Survey Originally

More information

4. Which of the following statements about marginal revenue for a perfectly competitive firm is incorrect? A) TR

4. Which of the following statements about marginal revenue for a perfectly competitive firm is incorrect? A) TR Name: Date: 1. Which of the following will not be true of a perfectly competitive market? A) Buyers and sellers will have an imperceptible effect on the market. B) Firms can freely enter and exit the market.

More information

AGEC 604 Natural Resource Economics

AGEC 604 Natural Resource Economics AGEC 604 Natural Resource Economics Air Pollution Historical View Great Smoky Mountains National Park Tennessee / North Carolina Good day Hazy day Photos: U.S. EPA Air Pollution Overview Sources of Pollution

More information

Price MCI MSC MEC. q1 Firm output. Industry output

Price MCI MSC MEC. q1 Firm output. Industry output Pindyck and Rubinfeld, Chapter 18 Sections 18.1, 18.2, 18.6 Externalities and Public goods Externalities arise when one agent s production or consumption activities affect another agent s production or

More information

Econ381/ES312 Midterm

Econ381/ES312 Midterm Econ381/ES312 Midterm Instructions: Answer 10 of the following questions in you exam booklet. You have 50 minutes, and each question is worth 5 marks. 1. Can a model be useful when it is based on assumptions

More information

Green Economics and. Green Consumerism

Green Economics and. Green Consumerism Green Economics and Green Consumerism The capitalist economy is based on economic liberalism This is parallel to political liberalism and draws on many of the same tenets: individualism, self-interest,

More information

2007 Thomson South-Western

2007 Thomson South-Western Monopolistic Competition Characteristics: Many sellers Product differentiation Free entry and exit In the long run, profits are driven to zero Firms have some control over price What does the costs graph

More information

Chapter 6. Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost

Chapter 6. Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost Chapter 6 Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost Chapter 6: Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and

More information

AP Microeconomics Chapter 10 Outline

AP Microeconomics Chapter 10 Outline I. Learning Objectives In this chapter students should learn: A. How the long run differs from the short run in pure competition. B. Why profits encourage entry into a purely competitive industry and losses

More information

Chapter 17. Externalities, Open Access, and Public Goods

Chapter 17. Externalities, Open Access, and Public Goods Chapter 17 Externalities, Open Access, and Public Goods There s so much pollution in the air now that if it weren t for our lungs there d be no place to put it all. Robert Orben Chapter 17 Outline 17.1

More information

Economics 155/Earth Systems 112 Spring Final Exam

Economics 155/Earth Systems 112 Spring Final Exam Economics 55/Earth Systems Spring 006-07 Final Exam Instructions Do not open this exam before it is time to begin. If you are a graduating, write Grad on your first bluebook so we can get your grades submitted.

More information

FINALTERM EXAMINATION FALL 2006

FINALTERM EXAMINATION FALL 2006 FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1) - PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.

More information

Design Criteria for Energy Market Prices

Design Criteria for Energy Market Prices Design Criteria for Energy Market Prices Energy Price Formation Senior Task Force February 15, 2018 Catherine Tyler Market Pricing Principles A market is a set of interactions between buyers and sellers.

More information

University of Toronto February 10, 2006 ECO 100Y L0101 INTRODUCTION TO ECONOMICS. Midterm Test #3

University of Toronto February 10, 2006 ECO 100Y L0101 INTRODUCTION TO ECONOMICS. Midterm Test #3 Department of Economics Prof. Gustavo Indart University of Toronto February 10, 2006 SOLUTION ECO 100Y L0101 INTRODUCTION TO ECONOMICS Midterm Test #3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS:

More information

Environmental Economic Theory No. 10 (26 December 2017)

Environmental Economic Theory No. 10 (26 December 2017) Professional Career Program Environmental Economic Theory No. 10 (26 December 2017) Chapter 12. Incentive-based strategies: Emission charges and subsidies Instructor: Eiji HOSODA Textbook: Barry.C. Field

More information

Midterm 2 Sample Questions. Use the demand curve diagram below to answer the following THREE questions.

Midterm 2 Sample Questions. Use the demand curve diagram below to answer the following THREE questions. ! Midterm 2 Sample uestions Use the demand curve diagram below to answer the following THREE questions. 8 6 4 2 4 8 12 16 1. What is the own-price elasticity of demand as price decreases from 6 per unit

More information

Chief Reader Report on Student Responses:

Chief Reader Report on Student Responses: Chief Reader Report on Student Responses: 2017 AP Microeconomics Free-Response Questions Number of Students Scored 87,858 Number of Readers 92 Score Distribution Exam Score N %At Global Mean 3.26 5 20,614

More information

Public Economics by Luca Spataro. Market failures: Externalities (Myles ch. 10. sections 4.4, 5, 7.2 & 7.3 excluded)

Public Economics by Luca Spataro. Market failures: Externalities (Myles ch. 10. sections 4.4, 5, 7.2 & 7.3 excluded) Public Economics by Luca Spataro Market failures: Externalities (Myles ch. 10. sections 4.4, 5, 7.2 & 7.3 excluded) 1 Introduction Connection between agents outside the price system The level of externality

More information

Introduction. Learning Objectives. Chapter 24. Perfect Competition

Introduction. Learning Objectives. Chapter 24. Perfect Competition Chapter 24 Perfect Competition Introduction Estimates indicate that since 2003, the total amount of stored digital data on planet Earth has increased from 5 exabytes to more than 200 exabytes. Accompanying

More information

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting Microeconomics Modified by: Yun Wang Florida International University Spring, 2018 1 Chapter 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Outline 13.1 Demand and

More information

TOPICS IN CAP-AND-TRADE LECTURE PLAN 8: MARCH 8, 2011 Hunt Allcott

TOPICS IN CAP-AND-TRADE LECTURE PLAN 8: MARCH 8, 2011 Hunt Allcott TOPICS IN CAP-AND-TRADE 14.42 LECTURE PLAN 8: MARCH 8, 2011 Hunt Allcott PASTURE 1: THOUGHTS ABOUT THE POWER PLANT VISIT What was interesting to you about the visit? Review the emissions control regulations

More information

Externalities. 5 Microeconomics ACTIVITY 5-2

Externalities. 5 Microeconomics ACTIVITY 5-2 ACTIVITY 5-2 Externalities A market externality refers to a situation where some of the costs or benefits from an activity fall on someone other than the people directly involved in the activity. Externalities

More information

Chapter 11 Perfect Competition

Chapter 11 Perfect Competition Chapter 11 Perfect Competition Introduction: To an economist, a competitive firm is a firm that does not determine its market price. This type of firm is free to sell as many units of its good as it wishes

More information

AGEC 105 Homework Consider a monopolist that faces the demand curve given in the following table.

AGEC 105 Homework Consider a monopolist that faces the demand curve given in the following table. AGEC 105 Homework 7 1. Consider a monopolist that faces the demand curve given in the following table. a. Fill in the table by calculating total revenue and marginal revenue at each price. Price Quantity

More information

Quiz #4 Week 04/05/2009 to 04/11/2009

Quiz #4 Week 04/05/2009 to 04/11/2009 Quiz #4 Week 04/05/2009 to 04/11/2009 You have 30 minutes to answer the following 15 multiple choice questions. Record your answers in the bubble sheet. Your grade in this quiz will count for 1% of your

More information

Question # 1 of 15 ( Start time: 01:24:42 PM ) Total Marks: 1 A person with a diminishing marginal utility of income: Will be risk averse. Will be risk neutral. Will be risk loving. Cannot decide without

More information

Market Power at Work: Computer Market Revisited

Market Power at Work: Computer Market Revisited Monopolies Part II Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity. Nancy Pearcey Market Power at Work: Computer Market

More information

Microeconomics: MIE1102

Microeconomics: MIE1102 TEXT CHAPTERS TOPICS 1, 2 ECONOMICS, ECONOMIC SYSTEMS, MARKET ECONOMY 3 DEMAND AND SUPPLY. MARKET EQUILIBRIUM 4 ELASTICITY OF DEMAND AND SUPPLY 5 DEMAND & CONSUMER BEHAVIOR 6 PRODUCTION FUNCTION 7 COSTS

More information

Exhaustible Resources Lecture 4

Exhaustible Resources Lecture 4 Economics of Natural Resources and the Environment Exhaustible Resources Lecture 4 Joana Vaz Pais. Lecture Plan II. Direct controls vs economic methods in pollution regulation A. Pollution as externality

More information

MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION. Professor Charles Fusi

MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION. Professor Charles Fusi MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION Professor Charles Fusi Learning Objectives Identify the characteristics of a perfectly competitive market structure Discuss the process by which a perfectly

More information

Environmental Economic Theory No. 2

Environmental Economic Theory No. 2 Professional Career Program Environmental Economic Theory No. 2 Economic Efficiency and Markets Instructor: Eiji HOSODA Textbook: Barry.C. Field & Martha K. Fields (2009) Environmental Economics - an introduction,

More information

OLIGOPOLY: Characteristics

OLIGOPOLY: Characteristics OBJECTIVES Explain how managers of firms that operate in an oligopoly market can use strategic decision making to maintain relatively high profits Understand how the reactions of market rivals influence

More information

Fall 2007 Economics 431 Final Exam Prof. Hamilton

Fall 2007 Economics 431 Final Exam Prof. Hamilton Fall 2007 Economics 431 Final Exam Prof. Hamilton Name: Question 1. (25 points) On January 1, 1998, the State of California introduced a ban on smoking in public bars because of health risks to employees

More information

Problem Set #2 Suggested Solutions

Problem Set #2 Suggested Solutions Economics 155 Stanford University Spring Quarter 2007 Problem Set #2 Suggested Solutions 1. An externality occurs when an agent s action directly affects the consumption or production of another agent,

More information

NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Final Exam December 8, 2006

NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Final Exam December 8, 2006 NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1. The slope

More information

Outline. Introduction. ciency. Excise Tax. Subsidy 2/29

Outline. Introduction. ciency. Excise Tax. Subsidy 2/29 2/29 Outline Introduction ciency xcise Tax Subsidy 3/29 Where have we come from? Part I I Consumers have a set of preferences over a basket of goods I Consumers choose the basket of goods that is a ordable

More information

ECO401 Current Online 85 Quizzes Question Repeated ignore In Green color are doubted one

ECO401 Current Online 85 Quizzes Question Repeated ignore In Green color are doubted one ECO401 Current Online 85 Quizzes Question Repeated ignore In Green color are doubted one Question # 1 of 15 ( Start time: 01:24:42 PM ) Total Marks: 1 A person with a diminishing marginal utility of income:

More information

Specific Learning Goals/Benchmarks and Student Assessment. AP Macroeconomics

Specific Learning Goals/Benchmarks and Student Assessment. AP Macroeconomics Unit Bartram Trail HS Specific Learning Goals/Benchmarks and Student Assessment AP Macroeconomics # Benchmark Assessment 1 1 1 2 1 3 1 4 2 5 2 6 3 7 3 8 3 9 3 10 3 11 4 12 4 13 4 14 4 15 4 16 4 17 Define

More information

Lecture 1 Welfare economics and the environment

Lecture 1 Welfare economics and the environment Lecture 1 Welfare economics and the environment Ingrid Hjort Econ 4910 - Environmental Economics - UiO January 18, 2017 1 / 30 The environmental problem Environmental problems Economic cost Source: Economic

More information

MICROECONOMIC FOUNDATIONS OF COST-BENEFIT ANALYSIS. Townley, Chapter 4

MICROECONOMIC FOUNDATIONS OF COST-BENEFIT ANALYSIS. Townley, Chapter 4 MICROECONOMIC FOUNDATIONS OF COST-BENEFIT ANALYSIS Townley, Chapter 4 Review of Basic Microeconomics Slides cover the following topics from textbook: Input markets. Decision making on the margin. Pricing

More information

Model: Nonmarginal Pricing

Model: Nonmarginal Pricing Model: Nonmarginal Pricing Today in class, we will examine a model of one type of distorted market: nonmarginal pricing. This variation of the basic model represents a pattern common to many resource-related

More information

9.1 Zero Profit for Competitive Firms in the Long Run

9.1 Zero Profit for Competitive Firms in the Long Run 9.1 Zero Profit for Competitive Firms in the Long Run Chapter 9 Applications of the Competitive Model With Free Entry into the Market Along with identical costs and constant input prices, implies firms

More information

Review Chapters 1 & 2

Review Chapters 1 & 2 Review Chapters 1 & 2 ECON 1 Midterm 1 Review Session Scarcity or No Free Lunch Principle. Cost-Benefit Principle. Reservation Price. Economic Surplus = Benefit Cost. Opportunity Cost (DO NOT FORGET!!).

More information

Public goods. Public Economics. Carlo Fiorio Bocconi University

Public goods. Public Economics. Carlo Fiorio Bocconi University Public Economics Bocconi University carlo.fiorio@unibocconi.it http://www.econpubblica.uni-bocconi.it/fiorio Academic Year 2006/2006 Today s questions What is a public good? Why does the state produce

More information

Introduction to Economics

Introduction to Economics Introduction to Economics ECONOMICS Chapter 5 Factor of Production Markets and Income Distribution contents 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 Demand and Supply of the Factors of Production Equilibrium in

More information

AGEC 603. Introduction. Theory of Retail Competition. Retail Location and Market Competition

AGEC 603. Introduction. Theory of Retail Competition. Retail Location and Market Competition AGEC 603 Retail Location and Market Competition Introduction Role of locations change when firms sell products strictly to local customers Shift in focus in firm s location decisions Household behavior

More information

CHARTERED INSTITUTE OF TAXATION ( T) (Institut Percukaian Malaysia) PROFESSIONAL EXAMINATIONS INTERMEDIATE LEVEL

CHARTERED INSTITUTE OF TAXATION ( T) (Institut Percukaian Malaysia) PROFESSIONAL EXAMINATIONS INTERMEDIATE LEVEL CHARTERED INSTITUTE OF TAXATION (225750 T) (Institut Percukaian Malaysia) PROFESSIONAL EXAMINATIONS INTERMEDIATE LEVEL ECONOMICS JUNE 2018 Student Reg. No. Date Desk No. Examination Centre Time allowed:

More information

Selected brief answers for review questions for first exam, Fall 2006 AGEC 350 Don't forget, you may bring a 3x5" notecard to the exam.

Selected brief answers for review questions for first exam, Fall 2006 AGEC 350 Don't forget, you may bring a 3x5 notecard to the exam. 1 Selected brief answers for review questions for first exam, Fall 2006 AGEC 350 Don't forget, you may bring a 3x5" notecard to the exam. These are brief answers intended to help you find the complete

More information

Practice Exam 3: S201 Walker Fall 2004

Practice Exam 3: S201 Walker Fall 2004 Practice Exam 3: S201 Walker Fall 2004 I. Multiple Choice (3 points each) 1. Which of the following statements about the short-run is false? A. The marginal product of labor may increase or decrease. B.

More information

AP Microeconomics Review With Answers

AP Microeconomics Review With Answers AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show

More information

Ch. 9 LECTURE NOTES 9-1

Ch. 9 LECTURE NOTES 9-1 Ch. 9 LECTURE NOTES I. Four market models will be addressed in Chapters 9-11; characteristics of the models are summarized in Table 9.1. A. Pure competition entails a large number of firms, standardized

More information

1. Perfect Competition and Efficiency 2. Extending the Reach of the Invisible Hand: 3. Extending the Reach of the Invisible Hand:

1. Perfect Competition and Efficiency 2. Extending the Reach of the Invisible Hand: 3. Extending the Reach of the Invisible Hand: Chapter 7: and the Invisible Hand Chapter Outline 1. 2. 3. Allocation of Resources across Industries 4. Prices Guide the Invisible Hand 5. Equity and Efficiency Modified by Key Ideas 1. The invisible hand

More information

Notes - Gruber, Public Finance Section 5.1 Externalities Definition of a fundamental externality: An fundamental externality exists when the actions

Notes - Gruber, Public Finance Section 5.1 Externalities Definition of a fundamental externality: An fundamental externality exists when the actions Notes - Gruber, Public Finance Section 5.1 Externalities Definition of a fundamental externality: An fundamental externality exists when the actions of one party affect the welfare or the production possibilities

More information

Textbook Media Press. CH 12 Taylor: Principles of Economics 3e 1

Textbook Media Press. CH 12 Taylor: Principles of Economics 3e 1 CH 12 Taylor: Principles of Economics 3e 1 Monopolistic Competition and Differentiated Products Monopolistic competition refers to a market where many firms sell differentiated products. Differentiated

More information

Textbook Media Press. CH 10 Taylor: Principles of Economics 3e 1

Textbook Media Press. CH 10 Taylor: Principles of Economics 3e 1 CH 10 Taylor: Principles of Economics 3e 1 Quantity Produced by a Perfectly Competitive Firm A perfectly competitive firm is a price taker, which means that it must accept the prices at which its sell

More information

University of Toronto July 27, ECO 100Y L0201 INTRODUCTION TO ECONOMICS Midterm Test # 2

University of Toronto July 27, ECO 100Y L0201 INTRODUCTION TO ECONOMICS Midterm Test # 2 Department of Economics Prof. Gustavo Indart University of Toronto July 27, 2006 SOLUTION ECO 100Y L0201 INTRODUCTION TO ECONOMICS Midterm Test # 2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1.

More information

Supply and Demand Study Guide

Supply and Demand Study Guide Supply and Demand Study Guide Fill in the blank Demand 1. If price increases, quantity demanded. 2. If the number of buyers decreases, demand. 3. Increasing demand causes the demand curve to shift to the.

More information

ECO 100Y INTRODUCTION TO ECONOMICS Term Test # 3

ECO 100Y INTRODUCTION TO ECONOMICS Term Test # 3 Department of Economics Prof. Gustavo Indart University of Toronto February 17, 2012 ECO 100Y INTRODUCTION TO ECONOMICS Term Test # 3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time

More information

AGEC 350, February, 2016 Review Questions for the first exam

AGEC 350, February, 2016 Review Questions for the first exam 1 AGEC 350, February, 2016 Review Questions for the first exam The following pages contain a list of questions that you should be able to answer given the readings and the material we have gone over in

More information

Top 10 Most Common Errors AP Economics 2011

Top 10 Most Common Errors AP Economics 2011 Top 10 Most Common Errors AP Economics 2011 Overview of Trouble Spots 11. Finding the Socially Optimal Quantity 10. Deadweight Loss from a Positive Externality 9. Allocative Efficiency 7. Price Elasticity

More information

MARKETS AND THE ENVIRONMENT. Review of Market System

MARKETS AND THE ENVIRONMENT. Review of Market System 1 MARKETS AND THE ENVIRONMENT Review of Market System Lecture Agenda Markets Review of Supply and Demand Efficiency criteria Welfare measures Market Failures Externalities Public goods Common property

More information

MICRO EXAM REVIEW SHEET

MICRO EXAM REVIEW SHEET MICRO EXAM REVIEW SHEET 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

More information

Use of the guidelines in protecting the environment

Use of the guidelines in protecting the environment Chapter 9. General approach In the context of the updating and revision of these guidelines, the ecological effects of major air pollutants were considered in more detail. This was undertaken in cooperation

More information

SHORT QUESTIONS AND ANSWERS FOR ECO402

SHORT QUESTIONS AND ANSWERS FOR ECO402 SHORT QUESTIONS AND ANSWERS FOR ECO402 Question: How does opportunity cost relate to problem of scarcity? Answer: The problem of scarcity exists because of limited production. Thus, each society must make

More information

Chapter 10: Monopoly

Chapter 10: Monopoly Chapter 10: Monopoly Answers to Study Exercise Question 1 a) horizontal; downward sloping b) marginal revenue; marginal cost; equals; is greater than c) greater than d) less than Question 2 a) Total revenue

More information

Competition among banks. Managerial Economics MBACatólica

Competition among banks. Managerial Economics MBACatólica Fernando Branco 2006-2007 Fall Quarter Session 6 Part I Competition through price: The Bertrand oligopoly There are a few suppliers; The outputs are perfect substitutes; Marginal costs are constant and

More information

Monday, October 22 Handout: Externalities and Efficiency

Monday, October 22 Handout: Externalities and Efficiency Amherst College Department of Economics Economics 111 Section 3 Fall 2012 Monday, October 22 Handout: Externalities and Efficiency Externalities Another Example of a Market Failure An externality exists

More information

Chapter 1- Introduction

Chapter 1- Introduction Chapter 1- Introduction A SIMPLE ECONOMY Central PROBLEMS OF AN ECONOMY: scarcity of resources problem of choice Every society has to decide on how to use its scarce resources. Production, exchange and

More information

CREATING ENVIRONMENTAL MARKETS. Modeling Solutions to Environmental Problems

CREATING ENVIRONMENTAL MARKETS. Modeling Solutions to Environmental Problems 1 CREATING ENVIRONMENTAL MARKETS Modeling Solutions to Environmental Problems 2 Creating Environmental Markets Conventional Solutions Market Solutions Assign property rights Pigouvian and emission taxes

More information

WIN-WIN DYNAMIC CONGESTION PRICING FOR CONGESTED URBAN AREAS

WIN-WIN DYNAMIC CONGESTION PRICING FOR CONGESTED URBAN AREAS 1 WIN-WIN DYNAMIC CONGESTION PRICING FOR CONGESTED URBAN AREAS Aya Aboudina, Ph.D. Student University of Toronto Baher Abdulhai, Ph.D., P.Eng. University of Toronto June 12 th, 2012 ITS Canada - ACGM 2012

More information

Agenda. The IS LM / AD AS Model: A General Framework for Macroeconomic Analysis, Part 2. The AD Curve. Aggregate Demand and Aggregate Supply

Agenda. The IS LM / AD AS Model: A General Framework for Macroeconomic Analysis, Part 2. The AD Curve. Aggregate Demand and Aggregate Supply Agenda Aggregate Demand and Aggregate Supply The IS LM / AD AS Model: A General Framework for Macroeconomic Analysis, art 2 22-1 22-2 Aggregate Demand and Aggregate Supply The AD-AS model is derived from

More information

BACHELOR OF BUSINESS. Sample FINAL EXAMINATION

BACHELOR OF BUSINESS. Sample FINAL EXAMINATION BACHELOR OF BUSINESS Sample FINAL EXAMINATION Subject Code : ECO201 Subject Name : LABOUR ECONOMICS This examination carries 50% of the total assessment for this subject. Examiner(s) Moderator(s) Joyce

More information

Sustainable Development

Sustainable Development Sherif Khalifa Sherif Khalifa () Sustainable Development 1 / 50 Rapid population growth and expanding economic activity in the developing world are likely to do extensive environmental damage. As a result

More information

ECON 3755 Environmental Economics Final Exam Review Questions:

ECON 3755 Environmental Economics Final Exam Review Questions: ECON 3755 Environmental Economics Final Exam Review Questions: Note: The final exam will consist of approximately 70% of questions from material after the midterm and 30% of questions from material before

More information

WRITTEN PRELIMINARY Ph.D. EXAMINATION. Department of Applied Economics. Summer Natural Resource and Environmental Economics

WRITTEN PRELIMINARY Ph.D. EXAMINATION. Department of Applied Economics. Summer Natural Resource and Environmental Economics WRITTEN PRELIMINARY Ph.D. EXAMINATION Department of Applied Economics Summer - 2006 Natural Resource and Environmental Economics Instructions: Identify yourself by your code letter, not your name, on each

More information

Model: Price Ceilings

Model: Price Ceilings Model: Price Ceilings Today, we will examine a model of price ceilings, one type of market distortion. This model reflects a pattern of policy used in response to unpopular fluctuations in the prices of

More information

ECONOMICS 103. Topic 5: Externalities. External costs and benefits

ECONOMICS 103. Topic 5: Externalities. External costs and benefits ECONOMICS 103 External costs and benefits Topic 5: Externalities Marginal external costs, marginal external benefits Marginal social costs and benefits v marginal private costs and benefits Environmental

More information

Vertical Differentiation in Monetary Search-Theoretic Model: Revisited. Chia-Ying Chang Victoria University of Wellington, New Zealand.

Vertical Differentiation in Monetary Search-Theoretic Model: Revisited. Chia-Ying Chang Victoria University of Wellington, New Zealand. Vertical Differentiation in Monetary Search-Theoretic Model: Revisited Chia-Ying Chang Victoria University of Wellington, New Zealand May, 2005 Abstract Quality levels have been widely discussed in the

More information

AP Microeconomics Review Session #3 Key Terms & Concepts

AP Microeconomics Review Session #3 Key Terms & Concepts The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph

More information

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2011

Introduction to Agricultural Economics Agricultural Economics 105 Spring 2011 Name Section (1 point) Introduction to Agricultural Economics Agricultural Economics 105 Spring 2011 Second Hour Exam Version 1 For the multiple choice questions, circle the most correct answer, there

More information

YOU WILL BE ALLOWED TO BRING TO THE EXAM TWO

YOU WILL BE ALLOWED TO BRING TO THE EXAM TWO 1 AGEC 350, April 2016 Review Questions for the Final Exam The following pages contain a list of questions that you should be able to answer given the material covered in AGEC 350 since the midterm exam.

More information

Econ Intermediate Microeconomic Theory College of William and Mary December 12, 2012 John Parman. Final Exam

Econ Intermediate Microeconomic Theory College of William and Mary December 12, 2012 John Parman. Final Exam Econ 303 - Intermediate Microeconomic Theory College of William and Mary December 12, 2012 John Parman Final Exam You have until 3:30pm to complete the exam, be certain to use your time wisely. Answer

More information

A Game-theoretic Framework to Investigate Conditions for Cooperation between Wind Power Producers and Energy Storage Operators

A Game-theoretic Framework to Investigate Conditions for Cooperation between Wind Power Producers and Energy Storage Operators A Game-theoretic Framework to Investigate Conditions for Cooperation between Wind Power Producers and Energy Storage Operators Siddharth Bhela Dr. Kwa-Sur Tam 1 Objective Cooperate? Wind Power Producer

More information

This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.

This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices. Demand Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services. The remainder of this unit assumes a perfectly competitive

More information

ADVANCED PLACEMENT MICROECONOMICS Maple Grove Senior High School Jeff Rush Social Studies Department

ADVANCED PLACEMENT MICROECONOMICS Maple Grove Senior High School Jeff Rush Social Studies Department ADVANCED PLACEMENT MICROECONOMICS Maple Grove Senior High School Jeff Rush rushj@district279.org Social Studies Department Required textbook Economics, McConnell and Brue, 17 th edition, 2008. Course description

More information

Slides and Images, Worth Publishers Inc. 8-1

Slides and Images, Worth Publishers Inc. 8-1 Perfect Competition Michael J. Murray Slides and Images, Worth Publishers Inc. 8-1 Market Structure Analysis By observing a few industry characteristics, we can predict pricing and output behavior of the

More information

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69 ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 2-4 - Introduction Towson University 1 / 69 Disclaimer These lecture notes are customized for the Macroeconomics

More information

ANSWERS for Section A and Section B MUST be attached together at the end of the exam with the tag provided.

ANSWERS for Section A and Section B MUST be attached together at the end of the exam with the tag provided. UNIVERSITY OF EAST ANGLIA Norwich Business School Main Series UG Examination 2015-16 ECONOMICS FOR BUSINESS NBS-4003Y Time allowed: 2 hours Answer ALL questions from Section A using the separate ANSWER

More information

Econ 101, section 3, F06 Schroeter Exam #2, Red. Choose the single best answer for each question.

Econ 101, section 3, F06 Schroeter Exam #2, Red. Choose the single best answer for each question. Econ 101, section 3, F06 Schroeter Exam #2, Red Choose the single best answer for each question. 1. Which of the following is consistent with elastic demand? a. A 10% increase in price results in a 5%

More information

CASE FAIR OSTER PEARSON 2012 Pearson Education, Inc. Publishing as Prentice Hall

CASE FAIR OSTER PEARSON 2012 Pearson Education, Inc. Publishing as Prentice Hall e PART II I The Market System: Choices Made by Households and Firms e CASE FAIR OSTER PEARSON 2012 Pearson Education, Inc. Publishing as Prentice Hall PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I

More information

Firms, trade costs and FDI. Giovanni Marin Department of Economics, Society, Politics Università degli Studi di Urbino Carlo Bo

Firms, trade costs and FDI. Giovanni Marin Department of Economics, Society, Politics Università degli Studi di Urbino Carlo Bo Firms, trade costs and FDI Giovanni Marin Department of Economics, Society, Politics Università degli Studi di Urbino Carlo Bo References for this lecture BBGV Chapter 6, paragraph 6.3, 6.4 Spring 2017

More information

Long Run Analysis. Definition 3

Long Run Analysis. Definition 3 Long Run Analysis Long run: Each firm has time to change its input mix optimally: for each firm short and long run supply curve can be different (see digression on next slide) Unless profits are 0, firms

More information

MICROECONOMICS DIAGRAMS

MICROECONOMICS DIAGRAMS MICROECONOMICS DIAGRAMS 1. Abnormal Profit 5. Average Fixed Costs 2. ad valorem tax At Qpm, Ppm > Pcost All costs are covered and then some! 6. Average Product The red line diminishes, but never becomes

More information

Debra Reinhart Hamid Amini. University of Central Florida

Debra Reinhart Hamid Amini. University of Central Florida Landfill Gas to Energy Projects: Incentives and Benefits Debra Reinhart Hamid Amini Overview Project Objectives Completed Phases Methodology Results & Conclusions Future Tasks Economic Benefits and Sensitivity

More information

Chapter 18. Externalities and Public Goods. Externalities. Negative Externalities. Positive Externalities

Chapter 18. Externalities and Public Goods. Externalities. Negative Externalities. Positive Externalities Chapter 18 Externalities and Public Goods Externalities Externalities are the effects of production and consumption activities not directly reflected in the market They can be negative or positive Chapter

More information

Externalities, Common Property, and Public Goods. Main topics. What are Externalities? Intermediate Microeconomics. positive.

Externalities, Common Property, and Public Goods. Main topics. What are Externalities? Intermediate Microeconomics. positive. Externalities, Common Property, and Public Goods Intermediate Microeconomics Main topics What are Externalities? Private and Social Costs and Benefits Example: Pollution Benefit-cost analysis and optimal

More information

Perfect Competition and The Supply Curve

Perfect Competition and The Supply Curve chapter: 13 >> Perfect Competition and The Supply Curve The following materials are taken from Chap. 13, Economics, 2 nd ed., Krugman and Wells(2009), Worth Palgrave MaCmillan. 2009 Worth Publishers 1

More information

Econ 98 (CHIU) Midterm 1 Review: Part A Fall 2004

Econ 98 (CHIU) Midterm 1 Review: Part A Fall 2004 Disclaimer: The review may help you prepare for the exam. The review is not comprehensive and the selected topics may not be representative of the exam. In fact, we do not know what will be on the exam.

More information

LECTURE NOTES FOR AREC 304: INTERMEDIATE PRODUCTION AND CONSUMPTION ANALYSIS PROFESSOR BRUCE R. BEATTIE

LECTURE NOTES FOR AREC 304: INTERMEDIATE PRODUCTION AND CONSUMPTION ANALYSIS PROFESSOR BRUCE R. BEATTIE LECTURE NOTES FOR AREC 304: INTERMEDIATE PRODUCTION AND CONSUMPTION ANALYSIS PROFESSOR BRUCE R. BEATTIE Department of Agricultural & Resource Economics University of Arizona Tucson, AZ 85721 2 Table of

More information

Hotelling s (1929) linear city. Hotelling

Hotelling s (1929) linear city. Hotelling US Manufacturing Industries C8 Average Profit ate >7 12.1%

More information