Write out the formula and calculate the present value of the following sequence of willingness to pay amounts: this year, $75; next year, $100; year 2, $150; year 3, $50. Use a 0 percent discount rate. Recalculate using a discount rate of 5 and of 10 percent. What is the effect of using a higher discount rate? Do individual people value consumption today over consumption tomorrow? What about society? Should they/it? Why or why not?
Graphically illustrate and discuss what happens to the statically efficient rate of output when there is: a) a technical change in the mode of production, such as new satellite-based resource exploration techniques; b) population or income growth; c) a new substitute technology; d) a change in consumer tastes and preferences away from some dimension of the product, e.g., plastic straws/bottles.
Describe a real situation where external costs (negative production or consumption externalities) are observed. Show graphically that when external costs are involved, market outputs tend to be too high, and market prices too low, relative to socially efficient levels. What is the associated effect on the incentive for individuals to engage in activities that created negative externalities?
Refer to the open-access beach problem in the text of this chapter and table 6-2. If the cost per day rose to $15, how many people would maximize the net benefits of the beach? And how many people would visit the beach under open access? Describe in economic terms why this would happen and what are some potential solutions to the problem?
Chapter 9: We have discussed 5 different types of economic value in class. Please give a personal example of each type of value based on your life experiences with COVID 19. Indicate which of these types of value are reflected well in markets or market-like exchanges and suggest a specific estimation method by which each type of value could be revealed?
Chapter 10/11: Compare and contrast static and dynamic efficiency applied to the fossil fuel market. Compare and contrast the concepts of resource rent and user cost as applied to this market and the potential differences in optimal resource use under static and dynamic efficiency.
Chapter 11, #1. Suppose gas costs $3 a gallon and the average car gets 28 miles per gallon. If Congress mandates that cars have to get 36 miles per gallon, by what percentage will this lower the costs of driving? If the elasticity of total miles driven (per year) with respect to the cost of driving is –1, by how much will total miles driven per year increase, assuming it is 10,000 miles at the beginning? How much will total annual gas consumption of the average car change as a result of the mandated program?