3 - Economics 423 Examination 1 Fall 2004 Prof Hackett KEY...

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Economics 423 Examination 1 Fall 2004 Prof. Hackett KEY Please provide the very best answer to any 10 of the questions below. Boldly cross out the question you do not wish to be graded. If you fail to cross out a question, I’ll randomly select a question to delete: 1. Briefly list (as bullet points) the positive externalities provided by forested watersheds: Reduced erosion and land movement Reduced sedimentation of fish spawning streams and rivers Reduced likelihood of severe flooding events downstream Habitat for forest-dwelling non-commercial species of plants and animals that the public cares about Potential public recreation site Gas exchange: production of O 2 , sequestration of CO 2 2. Imagine a setting in which land owners have the necessary property rights to commercially harvest forested watersheds as they see fit. Briefly list (as bullet points) the public policy tools that can be used to internalize the positive externalities associated with forested watersheds and thus promote socially optimal timber harvest methods. Note: If landowners have the right to harvest as they see fit, then no “public trust resource” property right exists, which implies that government cannot use regulatory tools like Pigouvian taxes or CDF harvest practice rules. What public policy tools are left are the “carrot” incentives of: Subsidies provided by government for practicing socially optimal forestry methods Conservation easements, where conservation groups or the government buys the landowner’s right to engage in excessive harvest Purchase of the land by conservation groups or the government, such as the Arcata Community Forest Eco-labeling systems (such as FSC) and higher prices paid by “environmentally conscious” consumers for labeled forest products 3. Imagine instead that members of society are recognized as having property rights to the positive externalities provided by forested watersheds, and that the state or federal government serves as proprietor of those “public trust resources.” Briefly list (as bullet points) the public
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policy tools that can be used here to internalize the positive externalities associated with forested watersheds and thus promote socially optimal timber harvest methods. Note: Now that the public is acknowledged to have a property right to the external benefits,
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This note was uploaded on 11/05/2009 for the course GEOL 21 taught by Professor Georgesmith during the Fall '08 term at Foothill College.

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3 - Economics 423 Examination 1 Fall 2004 Prof Hackett KEY...

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