Ecological Econ Final Example Questions

The production function y = Akα l 1−α is known as a (a) Cobb-Douglas production function (b) Labor-Capital production function (c) Bruntland production function (d) Aggregate industrial production function

(a) Cobb-Douglas production function

Which valuation method would you use to measure the losses when a species that relies on wilderness for habitat goes extinct? (a) Contingent valuation method (b) Hedonic method (c) Travel cost method (d) None of the above

(a) Contingent valuation method

Fill in the blank: A higher discount rate —- the present discounted value. (a) Lowers (b) Increases (c) Has no effect on (d) Has an ambiguous effect on

(a) Lowers

What information do you need to calculate consumer surplus? (a) Quantity, price, and the shape of the demand curve (b) Quantity, price, and cost (c) Quantity, price, and the shape of the supply curve (d) None of the above

(a) Quantity, price, and the shape of the demand curve

What can we say about Canada and the United States given the following data about their income distribution (after taxes and transfers): Canada's Gini coefficient is 32.2 and the U.S.'s Gini coefficient is 42.0? (a) U.S. has greater inequality (b) Canada has greater inequality (c) Not possible to determine

(a) U.S. has greater inequality

Which of the following is NOT acceptable in conducting a cost-benefit analysis? (a) Using peer-reviewed papers in non-economics journals (b) Choosing a discount rate to maximize net benefits (c) Calculate the PDV costs before the PDV benefits (d) Compare more than two options

(b) Choosing a discount rate to maximize net benefits

What type of environmental regulation dictates an overall level of emission ex ante and is generally cost effective? (a) Emission taxes (b) Tradable pollution permits (c) Technology mandates (d) Emission restrictions

(b) Tradable pollution permits

How is overconsumption defined using economic thinking? (a) Population exceeds environmental carrying capacity (b) Population growth exceeds food production growth (c) Consumption exceeds income and capital stock declines (d) Consumption exceeds investment in the capital stock

(c) Consumption exceeds income and capital stock declines

Which of the following is NOT a step in cost-benefit analysis? (a) Identify the actions (b) Identify the planning horizon and discount rate (c) Identify structural constraints (d) Measure cost and benefits

(c) Identify structural constraints

How does a country increase the stock of manufactured capital? (a) Slowing production of manufactured goods (b) Increase production of manufactured goods (c) Investing part of its income (d) Following the golden rule of accumulation

(c) Investing part of its income

Which of the following is NOT a category in GDP? (a) Consumption (b) Investment (c) Net depreciation (d) Net exports

(c) Net depreciation

How do economists measure the value a person has for a good or service? (a) The number of goods or amount of services they purchased (b) The number of people buying the good or service (c) Their maximum willingness to pay for a good or service (d) The amount of money they spent on a good or service

(c) Their maximum willingness to pay for a good or service

Which formula would you use to calculate the present discounted value of a $5,000 received in 20 years, given a discount rate of 5%? (a) 5000/(20)^0.05 (b) 5000/(1.5)^20 (c) 2000/(0.05)^20 (d) 5000/(1.05)^20

(d) 5000/(1.05)^20

Toxic waste dumped into a stream from a factory that harms downstream users (e.g. anglers, waterfront residents, riparian wildlife) without compensation is an example of what? (a) Steady state economy (b) Pareto improvement (c) Discounting (d) Externality

(d) Externality

Which of the following is the green NDP equation? (a) Green NDP = GDP - depreciation of natural capital (b) Green NDP = GDP - depreciation of manufactured capital (c) Green NDP = sum value of capital assets (d) None of the above

(d) None of the above

Discount rates used in cost-benefit analyses of public projects

3% and 7% are typical; lower rate preferred for social projects.

People enjoy swimming in the community lake. However, lawn fertilizer from lakefront homes washes into the lake every summer, which helps produce harmful algal blooms and makes swimming at the lake potentially harmful. What type of externality is this? Justify your answer.

A negative externality from the production of lawns.

Share of U.S. national income going to top 10% of earners in 1930s, 1970s and 2010s.

About 45%, 35% and 45%, respectively.

The EPA is considering new air quality regulations for all U.S. cities. What emissions policy would you recommend to the EPA if you wanted the reduction in pollution to be cost-effective?

Capping emissions and allow emissions trading would likely be cost-effective, although there could be concerns about the distributional consequences of where emissions tend to be lower/higher

Without sufficient sequestration, carbon levels in the atmosphere will remain elevated, contributing to global warming and hence climate disasters, including sea level rise and increased flood events. Forestland conservation is crucial to carbon sequestration. Based on this description, what is the intermediate ecosystem process, the final ecosystem service and the benefit?

Forest growth is the intermediate ecosystem process, carbon sequestration is the final ecosystem service, and the benefit is the reduction in damages from global warming and climate disasters.

What is a weakness of GDP when it comes to tracking sustainable growth and development?

GDP is a measure of production that does not subtract the part of production that must be invested to offset depreciation; this investment is necessary to maintain production and well-being.

Trends in weak sustainability measures (green NDP) in high-income countries

Generally increasing, roughly 1%-2% on average in high-income countries.

Suppose several polluting companies in the same industry decide to adopt a green and sustainable business strategy to improve their environmental performance. Do you think this will lead to an efficient level of pollution? Explain your answer.

No; individual persons and companies cannot be expected to fully internalize the externalities imposed on others, which are difficult to measure; policies are needed to reduce pollution to socially-preferred levels.

In thinking about the Solow model, would you say that modern economic growth appears to be driven mainly by increases in capital (K), workers (L), or other factors such as education and health (A)?

The other factors (A) appear to be the largest driver; modern economic growth is largely due to increases in worker productivity, which is due to improvements in access to education, health, and technology

Average annual U.S. GDP growth since the 1990s

about 2% annually.

U.S. capital-income ratio

about 400% or about 4:1.