midterm_review_f08

midterm_review_f08 - ECO330T: Environmental Resources and...

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ECO330T: Environmental Resources and Economic Growth University of Texas at Austin, Fall 2008 Marble Midterm Review Notes I. Environmental resources A. Economics of environmental issues “Externalities”, p. 344-354 and “Public Goods and Common Resources”, p. 362-366, 368-372 in Microeconomics by Michael Parkin Defines ‘externalities’, ‘public goods’ and explains the economic issues associated with these types of goods. We went over the fisheries model in the Common Resources section and we also went over the theoretical rules for efficiently deciding how much of a public good should be produced. A sample question : Carefully explain the outcomes that are predicted by the ‘tragedy of the commons’ model of external effects in the case of a commonly-owned good. Why are the socially optimal and the privately optimal outcomes different in this model? What is the social loss that occurs here? Please describe how two different policy approaches to reducing the social loss that occurs here would work. “Four-fold Classification of Goods”, p. 362 in Microeconomics by Michael Parkin A classification of goods based on their ‘economic’ properties, degrees of rivalry and excludability. This table provides a back-drop for the ‘migration’ story about how newly scarce, previously un-owned resources become integrated into a market-based economy. “The Consumer Equilibrium rule”, p. 155-157, in Microeconomics by Parkin (equimarginal benefits) The Equimarginal Principle, Tietenberg These two readings present the equimarginal rule as a solution to economic optimization problems. In one case the problem is to optimize the consumer benefit from consuming several different goods. In the other it is to minimize the costs associated with controlling pollution. This rule is widely used in environmental economics; it is also valuable in understanding the discussions in Coase on how to resolve “the problem of social costs, or externalities and in understanding the Hotelling rule for pricing a non-renewable natural resource. A sample question : Please prove that the equimarginal rule can represent the solution to an optimization problem. You can do this for a case where two activities are providing benefits that diminish with the amount of each activity, or you can do it for a case in which two activities both have costs that are increasing with the amount of the activity. “Basic Regulatory Instruments”, in Environmental Economics by Charles Kolstad, Oxford University
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This note was uploaded on 06/09/2011 for the course ECON 330 taught by Professor Marble during the Spring '11 term at University of Texas.

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midterm_review_f08 - ECO330T: Environmental Resources and...

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