Question

1. (A) If an increase in pollution abatement or environmental quality would increase social net benefit, what change in the allocation of society’s scarce resources between “other things” and the environment would be necessary to capture the increase in net benefits?

(B) Define what is revenue, how is it generated, and what change in the allocation of society’s scarce resources would be created by an increase in revenue.

(C) What is cost, how is it generated, and what change in the allocation of society’s scarce resources would be create by an increase in the cost of an input.

(D) Explain how a current user of land, to produce a private good such as agriculture or timber, would become a producer of a public good such as wildlife, biodiversity or carbon sequestering.

(E) Explain why having no price required to be paid for using or consuming environment services results in underproduction of environmental services.

Answer 1

Marginal costs and benefits are a vital part of economics because they help . When necessary, individual and social marginal cost and benefit curves can be drawn .Marginal cost measures the change in cost over the change in quantity will normally decrease through a short range, but increase as more is production.

Abenefit or cost that affects someone not directly involved in the production orconsumption of a good or service.

1.costs imposed on individuals not directly
involved in producing or consuming a good or service
2.causes the social cost of production
of a good or service to exceed the private cost borne by the producer
3. causes output to exceed the
economically efficient amount

Describe positive externalities.

1. benefits received by
individuals not directly involved in producing or consuming a good or service
2. causes the social benefit from consuming a
good or service to exceed the private benefit
3. causes output to be less than the
economically efficient amount.

The absence of private property rights or the
lack of sufficient enforcement of existing proposement