Econ 131 lecture 2

Econ 131 lecture 2 - Today Ch. 2 in Keohane and Olmstead...

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To d ay Ch. 2 in Keohane and Olmstead Problem Set 1 handed out Due 10/4 Not graded, but we’ll post suggested answers Reading for next time Ch. 3 of Keohane and Olmstead
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Net Benefts Net benefts are just what is leFt over aFter all the costs have been incurred and benefts realized, i.e. benefts minus costs Works like most other decisions in economics Example From the book Economist goes on vacation: Option Price (cost) Enjoyment (beneft) Net beneft Tent 400 550 150 Cabana 600 900 300 Cabana+ 850 1100 250 Deluxe 1250 1250 0
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Back to the environment For now, we’ll frame the question in terms improvements in environmental quality, for example Abatement of emissions to varying degrees 100% abatement no pollution Protection of land to varying degrees Bene±ts come from enjoying the improved environment Costs come from things we give up, and effort we have to make, in order to abate emissions or protect land Total Abatement Cost Why do we think this is usually convex as drawn?
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Why do we think this is usually concave as drawn? Net Benefts Net benefts = B(X)-C(X) Defne: X MAX ? X*?
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This note was uploaded on 01/30/2012 for the course ECON 131 taught by Professor Groves during the Spring '09 term at UCSD.

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Econ 131 lecture 2 - Today Ch. 2 in Keohane and Olmstead...

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