Econ Lecture #7: Property Rights, Surplus, Externalities, and Public Goods, Study notes of Agricultural engineering

Download Econ Lecture #7: Property Rights, Surplus, Externalities, and Public Goods and more Study notes Agricultural engineering in PDF only on Docsity! 1 AGEC 350 Reading Guide Lecture #7 due September 21 Tietenberg pp. 62-76 This is a long reading guide. In these pages, Tietenberg introduces some of the most important principles of the course. Try to work through this reading guide carefully; this will give you a strong foundation for everything we do in the rest of the semester. You only need to skim the section on common property resources and the section on producer surplus and scarcity rent. We will cover these issues in more detail later. 1. In economics, what do we mean by property rights? 2. In your own words explain whether each of the three characteristics of efficient property rights are or are not satisfied for an automobile. 3. In your own words, without referring to a graph, what is consumer surplus? 4. In your own words, without referring to a graph, what is producer surplus? 5. In figure 4.1, if someone was selling the good at the price $P* per unit. (see some answers below) a. How many units would the individual be willing to buy? b. Why would he or she not be willing to buy any more than that number at that price? c. Why would he or she not want to buy any less? d. The D in the graph stands for Demand, but the curve is also the MWTP curve. Explain why the same line has 2 meanings. 6. In figure 4.2, if someone offered the firm $P* per unit, a. How many units would the firm be willing to produce? b. Why would the firm not be willing to sell any more than that number at that price? c. Why would the firm not want to sell any less? d. The S in the graph stands for Supply, but it is also the MC curve. Explain why the same line has 2 meanings. 2 7. Indicate on the graph below the following: a. The market-clearing price. b. How many units would be produced and consumed at that price. c. Consumer and producer surplus. d. What does it mean for the price you identified in part a to be “market clearing”? $ 1 3 5 7 9 8. Define an externality in your own words. 9. In Figure 4.4, explain in a complete sentence what each of the following means (you should be able to explain in a way that would be clear to someone who knows nothing about economics). a. MCp b. MCs c. The vertical distance between MCS and MCP. (This is REALLY important). d. Qm e. Q* f. Pm g. P* 10. What is a pecuniary externality (also called a secondary impact)?