Narural Ecomics Midterm

Gross Domestic Product (GDP) is deficient as a measure of national income because it

Ignores natural resource depletion

Deciding to use water for irrigation, recreation, urban use, or ecosystem health is an example of an economic


A key focus of Natural Resource Economics is:

The use of raw materials from nature for production

Non-extractive use value for natural resources is mostly:


We should increase use of wind and solar power" is a:

Normative Statement

A public good is:

Non-Excludable and Non-Rival

The tragedy of the commons is most likely to happen when the good is:

A Common Resource

Aggregate Demand for a Private Good is summed:


Which of the following statements is correct?

Aggregate Demand for a Public Good should be summed vertically because the good is Non-Rival

Marginal Willingness-to-pay is measured by the height of the demand curve, total willingness to pay is measured by the area under the demand curve.


Although marginal cost may initially decline, it will always increase, eventually, as output becomes large enough


Technical change normally makes production less costly, resulting in a marginal cost curve:

that is shifted downward.

Consider figure 5-1 in the textbook. Which of the following statements about this figure is false?

Area c represents forgone gains to society due to lower than optimal output levels at q*

Which of the following accurately describes the economic concept of user cost in natural resource economics:

User cost is the change in the discounted value of future net benefits.

Suppose you own a stand of trees that are growing (in size and in value). You could increase your income in the current year by harvesting and selling the trees now, but this would negatively impact your future income. This negative effect on your future

Marginal User Costs

A non-renewable resource (natural capital) can be used in a way that can be considered (broadly) sustainable if:

The loss of the resource is offset by compensating investments in other types of capital

If marginal private costs are not equal to marginal social benefits there must be:

An External Cost or Benefit

A timber concession would have the effect of increasing future private costs and reducing current timber harvest.


Marginal private costs are part of social cost and external costs are also part of social cost.


The efficient use rate for a natural resource is the one that produces maximum resource rent.


Dissipation of resource rent occurs when use rates exceed the optimal level.


Consider the example of an open-access resource shown in Table 6-2 in the textbook (Public Beach). Given that the cost of visiting the beach is $12 per person, how many people will choose to visit the beach?

7 or 8

Again consider the example of an open-access resource shown in Table 6-2 in the textbook (Public Beach). In this example, the efficient number of beachgoers is four. This is the number that maximizes net benefits (Aggregate WTP-Total Cost).
What would the


Equity means net benefits are maximized.


The requirement that all cars have a catalytic converter would be an example of a:

Command and Control Policy

If someone owns land but does not have the right to sell the land we would say the property right is attenuated.


Knowledge Burden" refers to the idea that it is often costly or impossible to obtain the knowledge necessary to implement good public policy.


Redistributive goals encumbering efficiency goals is an example of:

Government Failure

Consider the problem of PM 2.5 air pollution in Cache Valley.
First, Identify at least 3 different policies (either real or hypothetical) that could be used to address this problem.
Second, categorize each of the 3 policies as Property Rights Policies, Go

1) Odd-Even Plan, Use of smoke less fuels, Walking and cycling
2)First policy can be categorized under Gov sponsored incentive policy command and control policy
The second policy can be categorized as a direct public production
The third policy can be cat

Deciding on the perspective from which a benefit cost analysis will be done means:

Deciding whose benefits and costs count

An Environmental Impact Analysis or Environmental Impact Report

Describes the environmental impact of a proposed policy

Cost Effectiveness Analysis is different from Cost-Benefit Analysis because:

Benefits are not considered

Which of the following is a problem with Benefit-Cost Analysis?

Practitioners may not be wholly disinterested
Stakeholders may seek to suppress/discredit
Benefits often much harder to measure than costs

Because of discounting, the net benefits of a project will be higher if:

The benefits are up front and the costs are delayed

Horizontal Equity means treating similar people similarly; Vertical equity means higher income people should pay more.


Robert Wilson and Paul Milgrom won the Nobel Prize in Economics in 2020 for:

Improvements to auction theory and inventions of new auction formats