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Tutorial 4 Questions

This document contains sample tutorial questions from a university course on resources and environmental economics. The questions cover topics like: 1) Defining key concepts like incremental benefits and how they are measured using marginal social benefit curves. 2) Multiple choice questions testing understanding of benefit estimation methods, including the averting expenditures method. 3) Calculus problems applying economic tools like marginal social benefit curves and the travel cost method to quantify the benefits of hypothetical environmental policies. 4) Graphical questions demonstrating how consumer surplus, producer surplus, and total surplus would change from a policy increasing tropospheric ozone levels based on reported findings.

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Stenerth Neretaba
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318 views3 pages

Tutorial 4 Questions

This document contains sample tutorial questions from a university course on resources and environmental economics. The questions cover topics like: 1) Defining key concepts like incremental benefits and how they are measured using marginal social benefit curves. 2) Multiple choice questions testing understanding of benefit estimation methods, including the averting expenditures method. 3) Calculus problems applying economic tools like marginal social benefit curves and the travel cost method to quantify the benefits of hypothetical environmental policies. 4) Graphical questions demonstrating how consumer surplus, producer surplus, and total surplus would change from a policy increasing tropospheric ozone levels based on reported findings.

Uploaded by

Stenerth Neretaba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Resources & Environmental Economics EC307

Lekima Nalaukai Semester II, 2020


Tutorial 4 Questions
Week 6 – Chapter 7 – Callan et al (2013)
Section A: Multiple Choices
1. Incremental benefits refer to the
A. accumulated gains linked to environmental policy
B. total social benefits of avoiding ecological damage
C. reduction in environmental damages associated with an environmental policy initiative
D. none of the above

2. If benefit functions for a public good could be identified accurately, incremental benefits would be
measured as
A. the area under the MSB function between the pre- and post-policy abatement levels.
B. the area under the TSB function between the pre- and post-policy abatement levels.
C. a horizontal distance on the MSB model corresponding to the pre- and post-policy abatement
levels
D. none of the above

3. The benefit estimation method that uses surveys about hypothetical market conditions is
A. the averting expenditure method
B. the contingent valuation method
C. the travel cost approach
D. the political referendum approach

4. The averting expenditures method


A. uses spending changes on goods that act as substitutes for environmental quality
B. defines personal environmental quality as the relevant market
C. has the disadvantage of jointness of production, which biases the benefit estimate
D. all of the above

5. In the averting expenditures model shown below, if environmental quality is E1, and personal
environmental quality is X1, the area or distance that represents the individual’s averting expenditures
is
MC1 based on overall environmental quality E1

$ a
g
f
b MC2 based on overall environmental quality E2

h
c
k
d
MB
X1 X2 Personal environmental quality (X)
e

A. edfX1
B. edhX2
C. dgh
D. edfhX2
Resources & Environmental Economics EC307
Lekima Nalaukai Semester II, 2020
Tutorial 4 Questions
Week 6 – Chapter 7 – Callan et al (2013)
Section B: Review of the Basics
1. There is some debate about whether secondary benefits should be considered when assessing public
policy proposals. Identify two reasons why secondary benefits might be excluded from a benefit-cost
analysis of proposed environmental policy.

2. Is it possible for an individual's valuation of an environmental commodity to include both user value
and existence value? Explain briefly.

3. One of the strengths of the contingent valuation method (CVM) is its ability to capture existence value.
How can the researcher take advantage of this, yet avoid some of the biases of such a survey-based
approach?
Resources & Environmental Economics EC307
Lekima Nalaukai Semester II, 2020
Tutorial 4 Questions
Week 6 – Chapter 7 – Callan et al (2013)
Section C: Calculations
1. Suppose the federal government is considering an air quality policy initiative that would effectively
increase abatement (A) of ozone from 10 percent to 20 percent and that the marginal social benefit
(MSB) of ozone abatement in millions of dollars has been estimated as MSB = 120 − 2.5A. Determine
the dollar value of incremental benefits associated with this initiative.

2. In response to acid rain damage to Chesapeake Bay, a collaborative federal and state program has
been proposed. You have been hired to evaluate the benefits of the plan as part of a formal benefit-
cost analysis. Use the travel cost method (TCM) to accomplish this goal, based upon a $20 admission
fee and the following pre- and post-policy recreational demand functions:

Pre-policy: P = 72 − 0.04V0
Post-policy: P = 90 − 0.04V1,

where V is number of visitors in thousands and P is the admission fee.


3. Refer to Application 7.3 and the estimated changes in consumer and producer surplus reported by the
NAPAP for various ozone policies. Graphically model the result of a 25 percent increase in tropospheric
ozone to qualitatively show the distribution of benefits reported by the NAPAP. (Do not attempt to
arrive at the numerical values for the changes in surplus values. Show only how the consumer,
producer, and total surpluses change in accordance with the reported findings.)

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