29 Questions
What do Bequest values measure?
People's willingness to pay for resources for their offspring
Which of the following is NOT a category of the total economic value of a tropical forest?
Investment Values
What is the Contingent Valuation Method (CVM) used for?
Estimating both use and non-use values
In what way does the Contingent Valuation Method (CVM) gather data?
Through direct surveys of people's willingness to pay
What does the Travel Cost Method (TCM) estimate?
The value of ecosystem services based on the distance traveled to reach the service
What distinguishes Bequest values from Existence values in the context of resource valuation?
Bequest values consider the benefits for offspring, while Existence values consider satisfaction from continuous existence
What is a major consequence of environmental degradation and depletion?
It affects the poorest in the community
What is the term used for pricing environmental goods?
Total Environmental Value (TEV)
What is the formula for calculating Total Economic Value (TEV)?
TEV = Direct values + Indirect values + Option values + Existence values + Bequest values
What type of value is derived from the actual use of an environmental asset?
Direct use value
What is an example of a non-use value?
The existence value of a forest unrelated to human use
What type of value represents the willingness to pay for the option to use an asset in the future?
Option value
What does the company save an amount equal to when reducing emissions?
The triangular area of BC𝐸0
What does the emission reduction cost equal to?
The triangular area of C𝐸𝑇𝐸0
What is the company's decision based on when the tax policy is implemented?
The MAC being equal to the tax rate
What does the company not want to do regarding emission reduction?
Reduce the emission lower than 𝐸𝑇
What is the amount of C tax payment equal to?
The rectangular area of A𝐸𝑇CT
What is the primary reason why traditional price information cannot be used to value the forest's function of providing habitat for an endangered animal?
The forest's function is not marketed or traded
In the case of valuing the forest's function in providing habitat for an endangered animal, which method can be used to determine its monetary value?
Contingent valuation method.
What does MAC stand for in the context of economic policy for environmental management?
Marginal Abatement Cost
What happens to MAC as the reduction amount/unit increases?
Increases
Suppose a company has to pay T amount of BDT per unit of emission. How does the company respond to the introduction of an emission tax?
Reduces emissions
What area represents the amount of tax payment for a company that continues to emit at the same level (𝐸0) after a tax policy is introduced?
Area of the rectangle A𝐸0T
Which valuation method is best suited for estimating economic benefits associated with environmental amenities such as aesthetic views or proximity to recreational sites?
Hedonic Price Method
What type of scenario is presented in the Contingent Valuation Method (CVM) to assess willingness to pay for environmental services?
Hypothetical scenarios with full description
Which method is based on the consumer demand theory to estimate the value attached to a location of environmental significance?
Travel Cost Method (TCM)
Which method analyzes the relationship between damage caused and the responsible factors in environmental problems?
Dose Response Functions (DRF)
Which method would be most effective for evaluating economic costs associated with noise pollution caused by traffic near a residential area?
Hedonic Price Method
What is the main focus of the economist's view regarding conflicts of opinion on environmental protection and economic growth?
They emphasize the cost (disadvantage) of environmental protection
Study Notes
Total Economic Value (TEV) of a Tropical Forest
- Direct values: timber, recreation, medicine, non-wood forest products
- Indirect values: nutrient cycling, wind protection, air pollution control, watershed protection, carbon fixation
- Option values: future direct and indirect use (future drugs, potential gene pool, recreation option)
- Existence values: satisfaction from knowledge of continuous existence
- Bequest values: passing benefits for future generations
Valuation Techniques
- Contingent Valuation Method (CVM): estimates economic values for ecosystem and environmental services
- involves directly asking people how much they would be willing to pay for specific environmental services
- can be used to estimate both use and non-use values
- Hedonic Price Method: estimates economic values for ecosystem or environmental services that directly affect market prices
- used to estimate economic benefits or costs associated with environmental quality, environmental amenities, and proximity to recreational sites
- Dose-response Functions (DRF): estimates economic values by analyzing the relationship between a cause and its effect
- example: the effect of air pollution on health, crop losses due to soil erosion
- Travel Cost Method (TCM): estimates economic values by analyzing the cost people incur to travel to a location of environmental significance
Economy vs Environment
- Conflicts arise between environmental protection and economic growth
- Different perspectives on the cost and benefit of environmental protection
- The concept of Total Economic Value (TEV) is used to price environmental goods
Economic Policy for Environmental Management
- Marginal Abatement Cost (MAC): the cost of reducing an additional unit of emission or discharge
- MAC increases as the reduction amount/unit increases
- Example: a company's response to the introduction of emission tax
- Case 1: no policy, no reduction, no tax payment
- Case 2: tax policy, emitting at E0, paying tax
- Case 3: reducing emissions to minimize tax payment
- Case 4: reducing emissions to minimize tax payment and reduction cost
Explore the concept of Total Economic Value (TEV) in environmental economics and how it relates to pricing environmental goods. Learn about use values, including direct and indirect use values, as well as non-use values in environmental economics.
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