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Unformatted text preview: Econ 260 Quiz 1: Point Break Down and Solutions In-Class Each Question worth 10 Points Take Home Each Question worth 7 points broken down as follows: 1.1 (a) 3.5 (b) 3.5 2.1 (a) 3.5 (b) 3.5 3.0 (a) 7 3.1 (a) 1 (b) 1 (c) 1 (d) 2 (e) 2 3.3 (a) 2 (b) 2 (c) 3 4.0 (a) 2 (b) 1 (c) 2 (d) 2 4.2 (a) 1 (b) 2 (c) 2 (d) 2 4.3 (a) 1 (b) 1.5 (c) 1.5 (d) 1.5 (e) 1.5 5.1 (a) 2 (b) 3 (c) 2 TFU (a) 7 Distribution: Solutions In Class 1) I think the most correct answer here is false. While safety or ecological standard proponents would certainly accept costs that well exceed measured benefits, none of the In class Take home Overall Mean 20 49 68 Std Dev 7 9 12 Median 19 49.5 67 standards discussed in the textbook totally ignore costs. In fact, the initial definitions for all three standards on p. 10 in the textbook note that goals should be pursued “unless the costs of doing so are prohibitive.” A simple way to “prove” that this statement is not true is to imagine if either a safety or ecological standard proponent would advocate mass extermination of the human population in order to prevent global warming. I think this cost would be “too high” for most (although maybe not all) proponents of the safety or ecological standards. 2) This statement is also false. Many individuals willingly and knowingly expose themselves to dangerous production processes in exchange for compensation. When these individuals’ health is harmed during the production process no negative externalities exist because they were already compensated for the harm to their health. 3) This statement is also false. The efficient level of pollution (as defined by the efficiency standard) occurs were MARGINAL benefits equal MARGINAL costs (or where the difference between total benefits and total costs – aka net benefits – is maximized). Take Home 1.1 1) This 5 degree target is an efficiency goal—it seeks to weigh the benefits of stabilizing greenhouse gas concentrations in the atmosphere against the costs of doing so. 2) Two defenses here. a) The first is that best guess estimates are better than no estimates at all. We need to put down on paper some notion of what the likely costs of business as usual global warming will be in order to decide how strongly we need to react to the threat. Otherwise, we could well “over-react”—reduce too much at too high a cost—or “under-react”—do nothing. b) The second: once we have our best guess down, we can begin to see how sensitive the estimates are to underlying assumptions. For example: agriculture is the sector most estimates are to underlying assumptions....
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This note was uploaded on 04/29/2008 for the course ECON 260, 365 taught by Professor Ward during the Spring '08 term at Lewis & Clark.
- Spring '08