Questions and Answers of Natural Resource Economics

In addition, assume that the government imposes a price control at P = $80/3.(a) Find the consumer and producer surplus associated with the resulting allocation.(b) Compare this price control
Assume the demand and marginal cost conditions given in the second self-test exercise in Chapter
During a worldwide recession in 1983, the oil cartel began to lose market share. Why would a recession make the cartel likely not only to lose sales, but also to lose market share?
Economist Abba Lerner once proposed a tariff on oil imports equal to 100 percent of the import price. This tariff is designed to reduce dependence on foreign sources as well as to discourage OPEC
Should benefit-cost analysis play the dominant role, a complementary role, or no role in deciding the proportion of electric energy to be supplied by nuclear power? Why or why not?
Suppose a tax on the extraction of a depletable resource is enacted and it will first take effect 10 years in the future. This resource is assumed to have a renewable, constant MEC substitute that
Suppose you wanted to hasten the transition from a depletable fossil fuel to solar energy.Compare the effects of a per-unit tax on the depletable resource to an equivalent per-unit subsidy on solar
For the increasing marginal-extraction-cost model of the allocation of a depletable resource, how would the ultimate cumulative amount taken out of the ground be affected by (a) an increase in the
Many states are now imposing severance taxes on resources being extracted within their borders. In order to understand the effect of these taxes on the allocation of the mineral over time, assume a
Consider an increasing marginal-cost depletable resource with no effective substitute.(a) Describe, in general terms, how the marginal user cost for this resource in the earlier time periods would
To anticipate subsequent chapters where more complicated renewable resource models are introduced, consider a slight modification of the two-period depletable resource model. Suppose a biological
One current practice is to calculate the years remaining for a depletable resource by taking the prevailing estimates of current reserves and dividing it by current annual consumption.How useful is
a. Consider the effect of population growth on the allocation on the dynamic efficient allocation of a depletable resource across time. Suppose we have two versions of the two-period model, discussed
a. Consider the general effect of the discount rate on the dynamic efficient allocation of a depletable resource across time. Suppose we have two versions of the two-period model discussed in this
Compare two versions of the two-period depletable resource model that differ only in the treatment of marginal extraction cost. Assume that in the second version the constant marginal extraction cost
Assume the same demand conditions as stated in Problem 1, but let the discount rate be 0.10 and the marginal cost of extraction be $4. How much would be produced in each period in an efficient
In the numerical example given in the text, the inverse demand function for the depletable resource is P = 8 – 0.4q and the marginal cost of supplying it is $2. (a) If 20 units are to be allocated
The environmental sustainability criterion differs in important ways from both strong and weak sustainability. Environmental sustainability frequently means maintaining a constant physical flow of
a. Suppose that hedonic wage studies indicate a willingness to pay $50 per person for a reduction in the risk of a premature death from an environmental hazard of 1/100,000. If the exposed population
Professor Kip Viscusi estimated that the cost per life saved by current government risk-reducing programs ranges from $100,000 for unvented space heaters to $72 billion for a proposed standard to
In Mark A. Cohen, “The Costs and Benefits of Oil Spill Prevention and Enforcement,”Journal of Environmental Economics and Management Vol. 13 (June 1986), an attempt was made to quantify the
Certain environmental laws prohibit the EPA from considering the costs of meeting various standards when the levels of the standards are set. Is this a good example of appropriately prioritizing
Consider the role of discount rates in problems involving long time horizons such as climate change. Suppose that a particular emissions abatement strategy would result in a$500 billion reduction in
If the marginal costs of each removal method are, respectively,$10q1, $5q2, and $2.5q3, how much of each method should you use to achieve the removal cost-effectively?b. Why isn’t an exclusive use
a. Suppose you want to remove ten fish of an exotic species that have illegally been introduced to a lake. You have three possible removal methods. Assume that q1, q2, and q3 are, respectively, the
Suppose a proposed public policy could result in three possible outcomes: (1) present value of net benefits of $4,000,000, (2) present value of net benefits of $1,000,000, or(3) present value of net
Was the executive order issued by President George W. Bush mandating a heavier use of benefit-cost analysis in regulatory rule making a step toward establishing a more rational regulatory structure,
Is risk-neutrality an appropriate assumption for benefit-cost analysis? Why or why not?Does it seem more appropriate for some environmental problems than others? If so, which ones? If you were
Identify whether each of the following resource categories is a public good, a commonpool resource, or neither and defend your answer:a. A pod of whales in the ocean to whale hunters.b. A pod of
Label each of the following propositions as descriptive or normative and defend your choice:a. Energy efficiency programs have created jobs.b. Money spent on protecting endangered species is
Suppose you were asked to comment on a proposed policy to control oil spills. Since the average cost of an oil spill has been computed as $X, the proposed policy would require any firm responsible
Suppose the market demand function (expressed in dollars) for a normal product is P = 80 – q, and the marginal cost (in dollars) of producing it is MC = 1q, where P is the price of the product and
Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 100 people in the community, each of whom has an identical inverse demand function given by P
In this chapter we have discussed how markets work. Recently some new markets have emerged that focus on sharing of durable goods among a wider circle of users. Examples include Airbnb and Uber. The
In primitive societies, the entitlements to use land were frequently possessory rights rather than ownership rights. Those on the land could use it as they wished, but they could not transfer it to
In a well-known legal case, Miller v. Schoene (287 U.S. 272), a classic conflict of property rights was featured. Red cedar trees, used only for ornamental purposes, carried a disease that could
In his book Thank you for Being Late: An Optimist’s Guide to Thriving in the Age of Acclerations, Thomas L. Friedman documents how the digital revolution is fundamentally changing life as we have
How specifically might the interdependence of the water accessibility and climate change challenges affect the design of polices enacted to meet these challenges? Give some specific examples of how
Which point of view in Debate 1.2 do you find most compelling? Why? What logic or evidence do you find most supportive of that position?
This chapter contains two views of the future. Since the validity of these views cannot be completely tested until the time period covered by the forecast has passed (so that predictions can be
In his book The Ultimate Resource, economist Julian Simon makes the point that calling the resource base “finite” is misleading. To illustrate this point, he uses a yardstick, with its one-inch

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