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17 Cards in this Set

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Define positive externalities
An individual creates benefits for others without being compensated. I.E. vaccines education
Define negative externalities
An individual imposes costs on someone else without compensating them. I.E. Pollution
Define hedonics
some amount of money people would be willing to accept as compensation for the pollution
Define cost of illness
people spend money for
How do you measure the COST of abatement?
Collect information about available tech, its price and how effective it is
When is it a good idea to impose a tax on output?
-Hard to monitor emissions
-Technology to reduce emissions is very costly
-Substitute goods are less polluting
When is it good to put a fee on emissions?
When it is easy to monitor emissions and when it is possible to reduce emissions without reducint output of the good
When is it good to use the permit system
When you can issue a fixed number of permits which limits pollution

AND

when you can afford the expense
When is it good to use the direct regulation or uniform standard
When each firm complies with the same standard
How do you measure the BENEFIT of abatement?
Benefit comes from avoiding damages caused by pollution
How is the optimal extraction rate determined for natural resources?
by the discount rate
When does optimal extraction occur for natural resources?
When marginal surplus grows at the rate of discount
What institutions are important to achieve optimal rate of extraction?
assign Property rights, have a competitive market structure, and open access
Define sustainability
the maximum catch that can be taken from a fishery over an indefinite period without causing the stocks to be depleted
Why are property rights essential for renewable natural resources?
Good for conservation and creates a strong market economy
What is the biggest advantage of putting a fee on emissions?
provides incentive for further cleanup
What is the biggest advantage of using the permit system in a market?
firms with a high cost of cleanup clean up less and firms with a low cost cleanup more

total amount of pollution is fixed