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17 Cards in this Set
- Front
- Back
Define positive externalities
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An individual creates benefits for others without being compensated. I.E. vaccines education
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Define negative externalities
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An individual imposes costs on someone else without compensating them. I.E. Pollution
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Define hedonics
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some amount of money people would be willing to accept as compensation for the pollution
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Define cost of illness
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people spend money for
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How do you measure the COST of abatement?
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Collect information about available tech, its price and how effective it is
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When is it a good idea to impose a tax on output?
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-Hard to monitor emissions
-Technology to reduce emissions is very costly -Substitute goods are less polluting |
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When is it good to put a fee on emissions?
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When it is easy to monitor emissions and when it is possible to reduce emissions without reducint output of the good
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When is it good to use the permit system
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When you can issue a fixed number of permits which limits pollution
AND when you can afford the expense |
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When is it good to use the direct regulation or uniform standard
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When each firm complies with the same standard
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How do you measure the BENEFIT of abatement?
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Benefit comes from avoiding damages caused by pollution
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How is the optimal extraction rate determined for natural resources?
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by the discount rate
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When does optimal extraction occur for natural resources?
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When marginal surplus grows at the rate of discount
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What institutions are important to achieve optimal rate of extraction?
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assign Property rights, have a competitive market structure, and open access
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Define sustainability
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the maximum catch that can be taken from a fishery over an indefinite period without causing the stocks to be depleted
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Why are property rights essential for renewable natural resources?
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Good for conservation and creates a strong market economy
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What is the biggest advantage of putting a fee on emissions?
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provides incentive for further cleanup
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What is the biggest advantage of using the permit system in a market?
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firms with a high cost of cleanup clean up less and firms with a low cost cleanup more
total amount of pollution is fixed |