NAME ______________________________

FREC 444 -- Economics of Environmental Management
FINAL EXAM
Wednesday May 22, 2002, Gore 308


A.  Definitions  (40 percent).  Please provide clear and complete explanations of each:

  1. Hardin's "tragedy of the commons"
  2. "whack the big dog" policy
  3. public good
  4. Coase Theorem
  5. rational ignorance
  6. regulatory capture
  7. compensating variation
  8. prisoners' dilemma
  9. ambient standard vs. emission standard vs. technology standard
  10. CERCLA's "joint and several liability" provisions


B.  Short essays (12 percent each; pick any five)

1.   Explain (with graph) how global biodiversity is (a) a public good; and (b) a luxury good.  How should a global biodiversity protection treaty between rich and poor nations reflect these aspects of biodiversity?

2.  Various bacterial pathogens are become increasingly resistant to antibiotics.  The decline in the effectiveness of antibiotics is often blamed on their overuse and misuse by patients, physicians, and the livestock industry.  Explain how this is an economic problem.  Outline an economic solution.

3.  What does "sustainability" mean to a stereotypical  tree-hugger?  What does it mean to a mainstream economist?  Is a free-market economy likely to assure either kind of sustainability over the long term?  What political reforms would improve long-term sustainability?

4.  List the relative efficiencies and inefficiencies of (a) pollution standards, (b) pollution taxes and (c) transferable emissions allowances.

5.  Under what conditions would it be economically efficient for the City of Newark to institute mandatory curbside recycling for cans, bottles and newsprint?

6.  Under what conditions is a pollution tax more efficient than Coasian bargaining?  Explain (with graph) what happens when you impose a pollution tax in a situation where Coasian bargaining is efficient.

7.  Briefly summarize Mancur Olson's theory of the evolution of "stationary bandits" into modern democratic governments.  How does this theory (or F.A. Hayek's, to which it is related) explain the failure of the USSR's command-and-control economy?  How might it explain the severe pollution problems (including the Chernobyl accident) of the USSR?

8.  Your estimated travel-cost demand schedule for Buzzard Lake assumed there was no congestion at the lake.  Explain (with graph) how a congestion externality would cause the true demand to deviate from your estimated site demand.  How might you account for the costs of site congestion in an empirical travel-cost analysis?

9.  Suppose you have completed a conjoint rating survey on protection of coastal plain ponds in Delaware, and regressed respondents' ratings against characteristics of hypothetical ponds using a linear specification:

RATING = B0 + B1*NSALSPEC + B2*PONDACRS + B3*PROTCOST   where
  RATING = respondent evaluation of each hypothetical pond (0="forget it" to 10="must preserve")
  NSALSPEC = number of salamander species present in the pond (0, 1, 2, 4 or 7)
  PONDACRS = size of pond in acres (0.5, 1, 2, 3, 5)
  PROTCOST = cost of protection via state purchase of pond and surrounding buffer area ($1,000, $2,500, $5,000, $10,000, $25,000).
What signs would you expect on the B1, B2 and B3 regression coefficients?  How would you calculate marginal willingness-to-pay for an additional salamander species in a pond?
 

C.  How would you like your final course grade to be calculated?

____% travel cost/hedonics project (maximum 40%)
____% conjoint design (maximum 20%)
____% suicide bomber (maximum 20%)
____% submitted essay question (maximum 20%)
____% this incredibly easy final exam (minimum 20%)