ECO 3620. Environmental Economics
Instructor:
John Whitehead
e-mail: whiteheadjc@appstate.edu
Exam #2 Study Guide
Key Terms:
- negative externality
- spillover costs
- marginal damage function
- marginal abatement cost function
- optimal emissions level
- consumer surplus
- producer surplus
- market welfare
- economic efficiency
- total economic value
- use value
- existence value
- nonuse value
- passive use value
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- revealed preference approach
- stated preference approach
- hedonic price method
- hedonic wage method
- averting behavior method
- travel cost method
- contingent valuation method
- contingent behavior method
- hypothetical bias
- value of statistical life (value of life saving)
- Artic National Wildlife Refuge
- Benefit cost analysis
- cost-effectiveness analysis
- economic impact analysis
- discounting
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Practice Question
1. Suppose there is an airshed in which is located an electric utility that
discharges fine particles into the air that damages the health of residents.
- Draw the MD-MAC diagram.
- Illustrate the optimal level of pollution.
- Suppose somebody invents a new technology for limiting emissions.
Illustrate the impact of the new technology on the optimal level of
pollution.
- Suppose income of the residents substantially increases. Illustrate the
impact of the income increase on the optimal level of pollution.
2. If an EPA policy would reduce the risk of death by 1 in 10,000 and the
average person is willing to pay $300/year to avoid the risk, what is the value
of statistical life?
From the recommended readings:
- When is a life too costly to save? Is it immoral to estimate a
dollar value on human lives for policy analysis? Whatever your answer,
describe the economic problem created when the value of statistical life is
not estimated.
- Does Air Quality Matter? Does air quality impact housing prices?
Describe how.
- Benefits and Costs of the Acid Rain Program? Are the net benefits
of the acid rain program positive or negative? What is the largest category
of benefits?