Home Page Social Science Business Sports Marketing Benefits And Costs Environmental Economics Test Questions - Flashcards

Environmental Economics Test Questions – Flashcards

August Dunbar

8 July 2022

question

Market

answer

refers to the interaction between consumers and producer for the purpose of exchanging a well defined commodity

question

supply function

answer

based on the decisions of producers

question

demand function

answer

based on the decisions of consumers

question

competitive goods

answer

large #s of independent buyers and sellers with no control over price--a homogenous product-- the absence of entry barriers--perfect information

question

resources

answer

no individual firm has control over input prices

question

private good

answer

rivalry in consumption and excludability

question

utility

answer

consumers purchasing satisfaction

question

demand

answer

the quantities of a good the consumer is willing and able to purchase at some set of prices during some time period

question

Demand price

answer

willingess to pay

question

market demand

answer

representing all consumers who are willing and able to purchase the commodity

question

horizontal summing

answer

sum of quantities at each demand price

question

law of supply

answer

the relationship between the quantity supplied and price is generally a positive one

question

equilibrium

answer

is the price at which quantity demanded by consumers

question

allocative effieciency

answer

proper allocation of resources among alternative uses --an assessment of benefits and costs--the use of marginal analysis--requires that the additional value of society places on another unit of the good is equal to what society must give up in resources to produce it

question

Technical efficiency

answer

concerned with economizing on resources used in production-refers to production decisions that generate maximum output,given some stock of resources

question

Profit maximization

answer

where marginal revenue= marginal cost

question

consumer surplus

answer

is a measure of net benefit accruing to buyers of a good estimated by the excess of what they are willing to pay over what they must actually pay

question

Producer surplus

answer

measure net gain to sellers, estimated by the excess of market price over marginal cost aggregated over all units sold

question

society's welfare

answer

economists use the sum of consumer and producer surplus to capture the gains accruing to both sides of the market

question

Market failure

answer

something that distorts the classical market outcome/ inefficient market conditions (ex. Pollution)

question

public good

answer

if the market is defined as "environmental quality" then the source of the market failure is that environmental quality--nonrival in consumption and its benefits are nonexcludable

question

externality

answer

a spillover effect associated with production or consumption that extends to a third party outside the market--if the market is defined as the good whose production or consumption generates environmental damage

question

nonrivalness

answer

a notion that the benefits associated with consumption are indivisible- meaning that when the good is consumed by one individual another person is preempted from consuming at the same time

question

nonexcludability

answer

means that preventing others from sharing in the benefits of a good's consumption is not possible

question

Market failure arises from

answer

the inability of free markets to capture the WTP for a public good

question

Nonrevelation of preferences

answer

an outcome that arises when a rational consumer does not volunteer a WTP because of lack of market incentive to do so

question

Free-ridership

answer

recognition by a rational consumer that the benefits of consumption are accessible without paying for them

question

Public goods market

answer

intervention usually done by government with policies that serve solutions to the problems arising form imperfect information

question

negative externality

answer

an external effect that generates cost to a third party

question

positive externality

answer

an external effect that generates benefits to a third party

question

Environmental externalities

answer

those affecting air, water, or land

question

Competitive equillibrium

answer

the point where marginal private benefit equals marginal private cost or where marginal profit=0

question

efficient equillibrium

answer

the point where marginal social benefit equals marginal social cost or where marginal profit=marginal external cost

question

property rights

answer

the set of valid claims to a good or resource that permits its use and the transfer of its ownership through sale

question

Coase Theorem

answer

assignment of property rights, even in the presence of externalities, will allow bargaining such that an efficient solution can be obtained--transactions are costless--damages are accessible and measurable

question

government intervention

answer

will internalize the externality as a solution to environmental externalities

question

incremental benefits

answer

the reduction in health, ecological, and property damges associated with an environmental policy initiative

question

primary environmental benefit

answer

is a damage-reducing effect that is the direct consequence of implementing policy (ex. more stable ecosystems, less incidence of respiratory ailments)

question

secondary environmental benefit

answer

is an indirect gain to society associated with policy implementation (ex. higher worker productivity from improved health)

question

user value

answer

benefit derived from physical use of or access to an environmental good

question

existence value

answer

utility or benefit recieved from an environmental good simply through its continuance as a good or service (preservation of bald eagle)

question

Direct user value

answer

benefit derived from directly consuming service provided by an environmental good (swimming in a lake)

question

indirect user value

answer

benefit derived from indirect consumption of an environmental good (aesthetic value)

question

Vicarious consumption

answer

utility associated with knowing that others derive benefits from an environmental good

question

stewardship

answer

sense of obligation to preserve the environment for future generations

question

Physical linkage approach

answer

estimates benefits based on a technical relationship between an environmental resource and the user of that resource

question

Damage function method

answer

uses a model of the relationship between levels of a contaminant and observed environmental damage to estimate the damage reduction arising from a policy (Physical)

question

Behavioral linkage approach

answer

estimates benefits using observations of behavior in actual markets or survey responses about hypothetical markets

question

Political Referendum

answer

uses the actual market of a public good by monitoring voting results from a political referenda on proposed changes in environmental quality (direct Behavioral)

question

Contingent valuation method

answer

employs surveys to inquire about individuals' willingness to pay for environmental improvements based on hypothetical market conditions (direct Behavioral)

question

averting expenditure method

answer

assesses changes in an individuals' spending on goods and services that are substitutes for personal environmental quality to assign value to changes in the overall environment (indirect behavioral)

question

Travel cost method

answer

values a change in the quality of an environmental resource by assessing the effect of that change on the demand for a complementary good (indirect behavioral)

question

Hedonic price method

answer

uses the theory that a good is valued for the attributes it posses to estimate the implicit or hedonic price of an environmental attribute and identify its demand as a means to assign value to policy (indirect Behavioral)

question

Environmental cost

answer

the cost of environmental improvement. Executing all resources used to design, implement, and execute the policy. Lot of Gov. spending required to identify all costs. Combine that with the amount of environmental regulations. Problem with these costs is that many are understated.

question

incremental costs

answer

The appropriate level of analysis for evaluating the cost of an environmental initiative. The rationale is to allow a comparison between post-policy expenditures and their pre-policy level, which we call the baseline. Incremental costs are calculated by first identifying the existing level of environmental expenditures, and then finding the difference between the two. These costs should reflect changes in economic costs.

question

explicit costs

answer

Administrative, monitoring, and enforcement expenses paid by the public sector as well as compliance costs.

question

implicit costs

answer

Concerned with any nonmonetary effects that negatively affect society's well being.

question

capital costs

answer

Expenditures for plant, equipment, construction in progress, and the costs of changes in production processes reducing pollution. Incurred regardless of amount of pollution abated

question

operating costs

answer

Costs incurred in operation and maintenance of pollution abatement processes, including spending on materials, parts and supplies, direct labor, fuel, and R & D. Directly related to quantity of abatement, comparable to variable costs.

question

social costs

answer

expenditures needed to compensate society for the resources used to maintain utility level. Accounts for all price, output, and income effects arising from regulation.

question

real-resource compliance costs

answer

direct costs associated w/ purchasing, installing, and operating pollution equipment, changing production processes, or capturing/selling waste products.

question

Government regulation costs

answer

monitoring, administrative, and enforcement costs linked to new regulations

question

Transitional costs

answer

Value of resources displaced to regulation-induced production declines and private cost of reallocating those resources.

question

indirect costs

answer

Adverse affects on product quality, innovation, productivity, and market effects indirectly influenced by policy, all of which may affect net levels of surpluses.

question

engineering approach

answer

estimates abatement expenditures based on the least-cost available technology needed to achieve pollution abatement. Relies on external experts

question

survey approach

answer

Derives estimated abatement expenditures directly from polluting sources. Relies directly upon polluting sources. More direct means to obtain abatement costs.

question

Benefit-cost analysis

answer

begins with identifying and monetizing environmental benefits and costs---1. Determine whether or not an opinion is feasible form a benefit-cost perspective 2. Evaluate all feasible options based on a decision rule, and then select a single "best" solution

question

present value determinaton

answer

a procedure that discounts a future value (FV) into its present value (PV) by accounting for the opportunity cost of money

question

Social discount rate

answer

should reflect the rate of return that could be realized through private spending on consumption and investment, assuming the same level of risk = discount rate used for public policy initiatives based on the social opportunity cost of funds

question

inflation correction

answer

adjusts for movements in the general price level over time

question

nominal value

answer

a magnitude stated in terms of the current period

question

real value

answer

a magnitude adjusted for the effects of inflation

question

deflating

answer

converts a nominal value into its real value

question

present value of benefits

answer

the time-adjusted magnitude of incremental benefits associated with an environmental policy change

question

present value of costs

answer

the time-adjusted magnitude of incremental costs associated with an environmental policy change

question

Benefit cost ratio

answer

the ratio of PVB to PVC used to determine the feasibility of a policy option if its magnitude exceeds unity.

question

present value of net benefits

answer

the differential of (PVB-PVC) used to determine the feasibility of a policy option if its magnitude exceeds zero If (PVB-PVC)>0 for a given option the option is considered feasible

question

maximize the present value of net benefits

answer

a decision rule to achieve allocative efficiency by selecting the policy option that yields greatest excess benefits after adjusting for time effects

question

minimize the present value of costs

answer

a decision rule to achieve cost-effectiveness by selecting the least cost policy option that achieves a preestablished objective

1 of

Unlock all answers in this set

Unlock answers

question

Market

answer

refers to the interaction between consumers and producer for the purpose of exchanging a well defined commodity

question

supply function

answer

based on the decisions of producers

question

demand function

answer

based on the decisions of consumers

question

competitive goods

answer

large #s of independent buyers and sellers with no control over price--a homogenous product-- the absence of entry barriers--perfect information

question

resources

answer

no individual firm has control over input prices

question

private good

answer

rivalry in consumption and excludability

question

utility

answer

consumers purchasing satisfaction

question

demand

answer

the quantities of a good the consumer is willing and able to purchase at some set of prices during some time period

question

Demand price

answer

willingess to pay

question

market demand

answer

representing all consumers who are willing and able to purchase the commodity

question

horizontal summing

answer

sum of quantities at each demand price

question

law of supply

answer

the relationship between the quantity supplied and price is generally a positive one

question

equilibrium

answer

is the price at which quantity demanded by consumers

question

allocative effieciency

answer

question

Technical efficiency

answer

concerned with economizing on resources used in production-refers to production decisions that generate maximum output,given some stock of resources

question

Profit maximization

answer

where marginal revenue= marginal cost

question

consumer surplus

answer

is a measure of net benefit accruing to buyers of a good estimated by the excess of what they are willing to pay over what they must actually pay

question

Producer surplus

answer

measure net gain to sellers, estimated by the excess of market price over marginal cost aggregated over all units sold

question

society's welfare

answer

economists use the sum of consumer and producer surplus to capture the gains accruing to both sides of the market

question

Market failure

answer

something that distorts the classical market outcome/ inefficient market conditions (ex. Pollution)

question

public good

answer

if the market is defined as "environmental quality" then the source of the market failure is that environmental quality--nonrival in consumption and its benefits are nonexcludable

question

externality

answer

question

nonrivalness

answer

a notion that the benefits associated with consumption are indivisible- meaning that when the good is consumed by one individual another person is preempted from consuming at the same time

question

nonexcludability

answer

means that preventing others from sharing in the benefits of a good's consumption is not possible

question

Market failure arises from

answer

the inability of free markets to capture the WTP for a public good

question

Nonrevelation of preferences

answer

an outcome that arises when a rational consumer does not volunteer a WTP because of lack of market incentive to do so

question

Free-ridership

answer

recognition by a rational consumer that the benefits of consumption are accessible without paying for them

question

Public goods market

answer

intervention usually done by government with policies that serve solutions to the problems arising form imperfect information

question

negative externality

answer

an external effect that generates cost to a third party

question

positive externality

answer

an external effect that generates benefits to a third party

question

Environmental externalities

answer

those affecting air, water, or land

question

Competitive equillibrium

answer

the point where marginal private benefit equals marginal private cost or where marginal profit=0

question

efficient equillibrium

answer

the point where marginal social benefit equals marginal social cost or where marginal profit=marginal external cost

question

property rights

answer

the set of valid claims to a good or resource that permits its use and the transfer of its ownership through sale

question

Coase Theorem

answer

question

government intervention

answer

will internalize the externality as a solution to environmental externalities

question

incremental benefits

answer

the reduction in health, ecological, and property damges associated with an environmental policy initiative

question

primary environmental benefit

answer

is a damage-reducing effect that is the direct consequence of implementing policy (ex. more stable ecosystems, less incidence of respiratory ailments)

question

secondary environmental benefit

answer

is an indirect gain to society associated with policy implementation (ex. higher worker productivity from improved health)

question

user value

answer

benefit derived from physical use of or access to an environmental good

question

existence value

answer

utility or benefit recieved from an environmental good simply through its continuance as a good or service (preservation of bald eagle)

question

Direct user value

answer

benefit derived from directly consuming service provided by an environmental good (swimming in a lake)

question

indirect user value

answer

benefit derived from indirect consumption of an environmental good (aesthetic value)

question

Vicarious consumption

answer

utility associated with knowing that others derive benefits from an environmental good

question

stewardship

answer

sense of obligation to preserve the environment for future generations

question

Physical linkage approach

answer

estimates benefits based on a technical relationship between an environmental resource and the user of that resource

question

Damage function method

answer

uses a model of the relationship between levels of a contaminant and observed environmental damage to estimate the damage reduction arising from a policy (Physical)

question

Behavioral linkage approach

answer

estimates benefits using observations of behavior in actual markets or survey responses about hypothetical markets

question

Political Referendum

answer

uses the actual market of a public good by monitoring voting results from a political referenda on proposed changes in environmental quality (direct Behavioral)

question

Contingent valuation method

answer

employs surveys to inquire about individuals' willingness to pay for environmental improvements based on hypothetical market conditions (direct Behavioral)

question

averting expenditure method

answer

assesses changes in an individuals' spending on goods and services that are substitutes for personal environmental quality to assign value to changes in the overall environment (indirect behavioral)

question

Travel cost method

answer

values a change in the quality of an environmental resource by assessing the effect of that change on the demand for a complementary good (indirect behavioral)

question

Hedonic price method

answer

question

Environmental cost

answer

question

incremental costs

answer

question

explicit costs

answer

Administrative, monitoring, and enforcement expenses paid by the public sector as well as compliance costs.

question

implicit costs

answer

Concerned with any nonmonetary effects that negatively affect society's well being.

question

capital costs

answer

Expenditures for plant, equipment, construction in progress, and the costs of changes in production processes reducing pollution. Incurred regardless of amount of pollution abated

question

operating costs

answer

question

social costs

answer

expenditures needed to compensate society for the resources used to maintain utility level. Accounts for all price, output, and income effects arising from regulation.

question

real-resource compliance costs

answer

direct costs associated w/ purchasing, installing, and operating pollution equipment, changing production processes, or capturing/selling waste products.

question

Government regulation costs

answer

monitoring, administrative, and enforcement costs linked to new regulations

question

Transitional costs

answer

Value of resources displaced to regulation-induced production declines and private cost of reallocating those resources.

question

indirect costs

answer

Adverse affects on product quality, innovation, productivity, and market effects indirectly influenced by policy, all of which may affect net levels of surpluses.

question

engineering approach

answer

estimates abatement expenditures based on the least-cost available technology needed to achieve pollution abatement. Relies on external experts

question

survey approach

answer

Derives estimated abatement expenditures directly from polluting sources. Relies directly upon polluting sources. More direct means to obtain abatement costs.

question

Benefit-cost analysis

answer

question

present value determinaton

answer

a procedure that discounts a future value (FV) into its present value (PV) by accounting for the opportunity cost of money

question

Social discount rate

answer

question

inflation correction

answer

adjusts for movements in the general price level over time

question

nominal value

answer

a magnitude stated in terms of the current period

question

real value

answer

a magnitude adjusted for the effects of inflation

question

deflating

answer

converts a nominal value into its real value

question

present value of benefits

answer

the time-adjusted magnitude of incremental benefits associated with an environmental policy change

question

present value of costs

answer

the time-adjusted magnitude of incremental costs associated with an environmental policy change

question

Benefit cost ratio

answer

the ratio of PVB to PVC used to determine the feasibility of a policy option if its magnitude exceeds unity.

question

present value of net benefits

answer

the differential of (PVB-PVC) used to determine the feasibility of a policy option if its magnitude exceeds zero If (PVB-PVC)>0 for a given option the option is considered feasible

question

maximize the present value of net benefits

answer

a decision rule to achieve allocative efficiency by selecting the policy option that yields greatest excess benefits after adjusting for time effects

question

minimize the present value of costs

answer

a decision rule to achieve cost-effectiveness by selecting the least cost policy option that achieves a preestablished objective

Environmental Economics Test Questions – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards