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53 Cards in this Set

  • Front
  • Back
efficiency equimarginal principle
NB maximized when MC = MB
"NB maximized when MC = MB"
efficiency equimarginal principle
second equimarginal principle
cost equimarginal principle
when all MC's are equal = least cost means to achieve target
efficient property rights structures must have
excusivity {{all B's and C's from owning resources should go only to owner}}

transferability {{property rights should be transferable from one owner to another }}

enforcability {{should be secore from seizure }}
consumer surplus
area under D and above P
producer surplus
area under P and above supply

short run: PS = profit + FC

long run: PS = profit + rent
net benefit

(on graph)
producer surplus + consumer surplus
the return to scarce inputs owned by producer
scarcity rent
most natural resources give rise to rent

this PS isn't eleminated by competition ... it persists in the long run
common property resource
-divisible (use of one affects another's)


leads to tragedy of the commons
-hunters increase, time and effort of given amt needed inrease

*unrestricted access --> resources overexploited
*scarcity rent lost
public good


free rideri problem
monopoly operates at

producer surplus maximized
MC = M-Wtp at Q 15

supply = 40

what is the efficient allocatoin for DR 0 and DR 10
15, 15
"marginal user cost"
scarcity's opportunity cost

greater use increases opportunity cost .... MUC = PV
MUC = P - MC
weak sustainability
maintanence of value of total capital
strong sustainability
maintenence of value of Natural capital
environmental sustainability
--not sufficient just to maintain value of sum

must maintain physical flows of certain resources

ex . in fishery must assure catch levels don't exceed growth of biomass
"hartwick rule"
a constant level of consumption can be maintained if all scarcity rent is invested in capital

keep principle intact and livew off only flow of services

**prob** if physical capital can't substitute for natural capital

{{ex of weak sustainability}}
1st law of thermodynamics
energy can't be created / destroyed

mass flowing into economy from enviro either accumulates in economy of deposited in enviro as waste products
2nd law of thermodynamics
conversion of energy from one form to another -- not completely efficient

-- in absence of new energy ... closed system will eventually use up all its energy
positive v normative
what is / what ought to be

sum of WTP for EACH unit

area under demand to Q
opportunity costs
the NB lost when services are forgone in certain use

all enviro services should be measured as opportunity costs
TC =
sum of MC's

(under S curve to Q)
NB =

area under d curve, above S curve
calculate PV aka
static efficiency
when NB maximized by Q...

when MB= MC
pareto optimality
when no other allocation can produce same NB without making someone worse off
dynamic efficiency
finding optimal allocation over time

PV compares NB in 2 different periods

Efficiency when PV of NB maximized
BC analysis requires
monetization of all values
value of stock / flow
value of stock should = PV of services flowing from stock

if PV flow is maximized then efficient
total economic value of resouces includes:
use value

option value

non-use value
use value
option value
non-use value
valuation methods
direct observable

direct hypo

indiect observable

inderect hypothetical
direct observable
markets ... value can be inferred
direct hypothetical
contingent valuation

value no directly observable (ex. when non-use value)
indirect observable
travel cost

hedonic property value

hedonic wage value

avoidance expenditures
indirect hypothetical
choice / conjoint::
choose between states of world

contingent ranking::
situ's differ in amt of enviro resouce available -- order rank them
strategic bias

- in CV prob
provide answer to influence out come

false value- too high
information bias

in CV
not enough info on topic
starting pt bias

in CV
predefined range
hypothetical bias

in CV
survey is hypothetical

aren't faced w actual costs
travel cost

indirect observable
number of trips to a site

whether visit a site / which one
hedonic property value

indirect observable
take market info and compare attributes

isolate enviro component

determine $$
hedonic wage value

indirect observable
isolate extra compensation for enviro risk
avoidence expenditures

indirect observable
paying to install air purifier
dominant policy
higher net benefits for every out come

((when no dominant policy, calculate probability))
diamond and hausman on CV
CV - non-credible responses

1-altruism ((include other's Bs)
2-warm glow
3- violates reasonable bids
4- embedding effect ((question gives you sense of value))

instead of CV use 0 or panel of experts
hanneman on CV
conduct good survey - most of D and H's concerns eliminated

no convenient sampling... no self administered surveys
existence value in...
included in CV

existence value = value for non users
market failures
- ext
+ ext
common property resource
public goods
efficiency when...

S = D

D = MC