Sustainability and Dynamic Efficiency

Sustainability and Dynamic Efficiency

1.Explain what you understand by the following:

a.Sustainability. In your answer, clearly distinguish between weak sustainability and strong sustainability.

b.intergenerational equity

c.static efficiency

d.dynamic efficiency rights access

g.willingness to pay

h.opportunity cost

2.Discuss some valid and some invalid objections to letting prices eliminate shortages of supplies of scarce resources.

3.Explain the difference between renewable and non-renewable resources. Include examples in your answer.

4.Provide arguments for and against the assertion that natural resources are getting increasingly scarce over time. Include examples in your answer.

5.Many regions of the world are undergoing deforestation. Is the optimal rate of deforestation zero?

6.What are some of the main problems with resource use?

7.Discuss the possible effects of technological progress on the use of natural resources.

8.The discount rate plays an important role in problems involving long time horizons such as climate change. Suppose that a particular strategy for reducing emissions of greenhouse gases that cause climate change would result in a $500 billion reduction in damages 50 years into the future.

a.Assuming a discount rate of 10 percent, calculate the maximum amount that should be spent now to eliminate those damages?

b.How would the maximum amount spent now to eliminate those damages change if the discount rate is 2 percent, rather than 10 percent?

9.The following table provides data on the number of visitors to an open-access public beach, the individual marginal willingness to pay of the visitors to the beach, and the costs per visit to the beach.

No. of visitors Individual MWTP Cost/visit
1 $20 $15
2 $20 $15
3 $20 $15
4 $20 $15
5 $18 $15
6 $16 $15
7 $14 $15
8 $12 $15
9 $10 $15
10 $8 $15

a. Determine the number of visitors that would maximize the net benefit of the beach.

b. Under open access, how many people will visit the beach?

c. Use the answers to part (a.) and (b.) to explain the dissipation of rents in this case.

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