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Homework #9 due Quiz #4 After Break Homework #10 due Dec. 2 nd Exam #4 on Dec. 2 nd Last week of class Group Presentations Group Papers Dec. 9th

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Comment on the statement that low discount rates should always be used to evaluate environmental impacts. Are there instances when high discount rates could produce greater environmental protection?

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Explain why we will likely never run out of a non-renewable resource such as oil. Does this also imply that we always be able to extract all the oil we need? Explain.

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What has been the general trend in non- renewable resource prices in the past several decades? What has generally been responsible for this trend? Is this trend consistent with Hotellings rule?

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When the government allows private firms to extract minerals offshore or on public lands, two common means of sharing in profits Bonus bidding awards the highest bidder the right to extract and paid up-front Production royalties charges a per-ton royalty on each ton extracted and paid as long as the mineral is extracted

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How will this affect extraction over time? Would either be consistent with the efficient allocation? Suppose the price path and size of deposits are unknown. How would the risk be shared between the government and mining company, for the two different policies?

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MC AC Q $/Q MR

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A = represents the stock of a resource a = represents the recovery rate Amount used over 4 years is A+ A*a + A*a 2 +A*a 3 A/(1-a) for infinity

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The Disposal Decision Recyclable waste comes from either new scrap or old scrap. New scrap is residual material from a production process while old scrap is recovered from used products. When the private marginal cost of disposal is lower than the marginal social cost, the market level of recycling is inefficient.

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Copyright 2009 Pearson Addison- Wesley. All rights reserved. 9-13 Disposal Costs and Scrap Market If consumers bear the true marginal disposal cost, more materials could be integrated into production process; price falls, and total consumption of inputs would increase as well as the use of recycled materials. Correct inclusion of disposal cost would increase the amount of recycling and extend the economic life for depletable and recyclable resources.

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U.S. has achieved higher recycling rates 32.5% 52% of paper 31% of plastic and soft drink bottles 45% of aluminum cans 63% of steel packaging 67% of large appliances Transport, labor and processing costs are usually significant and play a large role in overall recycling rates. As recycling becomes more cost competitive, however, manufacturers rely more heavily on recycled inputs as well as product design.

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Copyright 2009 Pearson Addison- Wesley. All rights reserved. 9-17 Subsidies on raw materials are another source of inefficiencies. One example is the Mining Law of 1872. Raw materials are artificially cheap. Undermine the market for recycled inputs.

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Noninternalized environmental damages from the use of virgin materials will also bias the market away from recycled materials. These might be damages from extraction or from processing. Host fees are being used to address the issue of siting of landfills. Host fees compensate the community that agrees to house the landfill.

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Public polices include volume pricing, refundable deposits and taxes. Volume pricing are disposal charges that reflect the true social cost of disposal. A refundable deposit system is typically designed to be an initial charge that reflects the cost of disposal and to provide a refund that encourages recycling and helps conserve virgin materials. Taxing virgin materials and subsidizing recycling activities can also promote recycling.

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Homework #9 due Quiz #4 After Break Homework #10 due Dec. 2 nd Exam #4 on Dec. 2 nd Last week of class Group Presentations Group Papers Dec. 9th