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revfinee11

# revfinee11 - Review Final Challenge Environmental Economics...

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Review: Final Challenge Environmental Economics: ECO 345 Fall 2009 The following questions review only the class notes since the last homework. The formulas provided below will also be provided on the challenge. All questions come from the notes. Also review the third homework, problems done in class, this review sheet, and chapters 15.2, 13.2, 16.2, 12.5, 20.1, and 20.2. Graphs to know: a. Monitoring. Tax on total pollution or audit/fine (Figure 44). b. Initial permit allocations. Welfare loss from allocating permits to a monopolist (Figure 46). c. Double Dividend. (a) Welfare loss from a tax on hours (Figure 47). (b) Welfare gain and tax revenue from a Pigouvian tax (Figure 48). (c) Revenue recycling effect (Figure 49). (d) Tax interaction effect (Figure 50). d. EKC. (a) Luxury good (Figures 55-56). (b) Corner solution (Figure 58). (c) Poor institutions (Figure 59). (d) Fixed costs (Figure 60). e. The case of the Buffalo: Harvest after opening to international trade (Figure 61). The following formulas will be provided. 1

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Taxes and Permits under uncertainty ¯ t = MD ( E ) = ¯ MC ( E ) , MD parenleftBig ¯ E parenrightBig = ¯ MC parenleftBig ¯ E parenrightBig , ¯ t = MC H ( E H ) (1) MC H ( E H ) = MD ( E H ) , loss = 1 2 ( loss H + loss L ) (2) loss H = 1 2 ( E H - E H ) ( MD ( E H ) - MC H ( E H )) (3) loss H = 1 2 parenleftBig E H - ¯ E parenrightBigparenleftBig MC H parenleftBig ¯ E parenrightBig - MD parenleftBig ¯ E parenrightBigparenrightBig (4) Monitoring and Compliance costs CC = 1 2 ( E 0 - E ) ( MC ( E ) - 0) , Total Ave fines = πf ( E - E std ) (5) Marginal Average fine = πf, Total Firm Costs = CC + Tot Ave fines (6)
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