Review Sheet for the Final
Here is a list of topics covered this semester. Be sure to
bring a calculator to the exam.
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Evaluating the Market Outcome
Consumer, producer and social surplus
Marginal social surplus (MSS=MSB-MSC)
Pareto efficiency
Distribution, compensation and fairness
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Externalities
What is an externality?
Marginal social benefit
Marginal social cost
Effect of externalities on efficiency
Examples of good and bad externalities
Solving by side compensation payments
Solving with taxes or subsidies
The NIMBY problem
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Common Property
What is it?
What problems does this cause?
Example: the Edwards aquifer
Solving by assigning ownership to the government and selling
Solving by quotas
Solving by assigning ownership to others
Efficiency of different solutions
Distributional effects of solutions
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Public Goods
Exclusivity
Rivalry
Pure public goods
Underprovision by markets
Example: biodiversity
Coordination failure
Congestible goods
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Pollution Control
The Coase theorem
MB and MC of abatement
Minimizing cost with many sources
Distributional effects of policies
Using permits to achieve distributional goals
Taxes vs. permits under uncertainty
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Measuring Environmental Benefits
Costs of avoidance and mitigation
Risk assessment
Hedonic pricing
Travel cost method
Option demand
Existence value
Contingent valuation
Embedding bias
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Exhaustible Resources
Marginal extraction cost
Exploration
Grade distribution curve
USGS classification system
Proven reserves
What's wrong with "years of supply"?
Effect of prices
Effect of new technology
Effect of discoveries
Marginal social surplus
Royalty
Efficient allocation of a fixed stock
Equating the PV of MSS over time
Arbitrage and equating the PV of royalties over time
Efficiency of markets
Backstops
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 05/03/2005
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