ECP3302_Answers_Exam1.pdf - 1 ECP 3302 INTRODUCTION TO...

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1 ECP 3302: INTRODUCTION TO ENVIRONMENTAL ECONOMICS Answer Key for Exam 1 (Total 100 Points) Section A: 20 Points (fill out the blanks with appropriate word/words based on your readings from the textbook, each question is worth of 2 points). 1. The goal of an efficiency standard is to maximize the net benefits of projects which impact the environment, without reference to who bears the costs or gains the benefits. 2. Government regulation of pollution is one way of internalizing externalities. 3. The provisions of public goods is a problem for the free-market due to the existence of two factors: 1) transaction costs 2) free riding 4. A Pareto-improving policy is one that actually makes all parties better off. 5. The Coase Theorem says that if polluter and victim can bargain easily and effectively, private negotiation should arrive at the efficient outcome regardless of who has the initial right to pollute or prevent pollution. 6. The higher the discount rate, the lower the value of benefits received in the future.. 7. The Malthusian Population Trap shows that as population grows geometrically and the food supply increases only arithemetically , available food per person declines, providing a natural check on further population growth. 8. The three categories of values from environmental protection are: 1) use value; 2) option value; 3) existence value. The sum of these three categories equals the total value of an environmental resource. 9. Advocates of the safe minimum standard argue that unique resources should be preserved at levels that prevent their irreversible depletion, unless the costs of doing so are “unacceptably” high, with this limit determined by political support for preservation. 10. We can measure the benefits of environmental improvement by determining people’s maximum willingness-to-pay (WTP) for such improvements or by determing people’s minimum willingness-to-accept (WTA) compensation in exchange for a degradation in environmental quality. Section B: 20 Points (answer the following multiple choice questions, each question is worth of 2 points). 1. From a utilitarian perspective, preserving rainforests to protect biodiversity a. is relatively unimportant. b. should not be done if it conflicts with profits. c. always makes sense if it actually protects endangered species. d. should be pursued if it increases overall human well-being. e. is definitely a bad idea if it leads to local people losing jobs and income.
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2 Ans.__d____ 2. At the efficient level of pollution a. the total costs and benefits of reduction are equal. b. it is impossible to make one person better off without making another person worse off. c. net monetary benefits are maximized. d. the marginal benefits and costs of reduction are roughly equal.
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