Economics Problem Set I - Characteristics of Property Rights and Market Efficiency - Prof., Assignments of Economics

Download Economics Problem Set I - Characteristics of Property Rights and Market Efficiency - Prof. and more Assignments Economics in PDF only on Docsity! Economics 480/580 J. Miranowski Problem Set I Due: September 23, 2008 I. Discussion Questions: 1. What four characteristics of well-defined property rights are essential to the function of efficient markets? Why is each of these characteristics necessary for efficient markets? 2. Incomplete markets fail to allocate resources efficiently. What are the sources of incomplete markets and why do they cause problems in allocating resources efficiently? 3. Are we running out of natural resources? (Justify your answer and distinguish between nonrenewable commodity and amenity resources.) 4. Define and distinguish between the “weak sustainability” and “strong sustainability” hypotheses. Based on the readings and our class discussions of resource scarcity and economic sustainability, which hypothesis does the existing empirical evidence tend to support? Provide “economic evidence” to support your contention. 5. Explain what is meant by the following statement: “The market system sends out signals that induce technical change and substitutions.” How does this process augment scarce resource? 6. How does the discount rate influence the optimal rate of nonrenewable resource extraction or use? What role should future generations have in our economic decisions regarding the use of nonrenewable natural resources?