EEP 101 - Econ 125: Final Examination Information

Lecture notes: topics 1-23

Required Readings: Consult the syllabus and bSpace
Spring, 2016
Time: Friday, May 13, 2016, 7-9PM
Location: 155 Dwinelle Hall
This is a closed book, closed note, two hour exam. No calculators, PDAs, books, or notes please.
Format similar to midterm. More short answers, one long essay.
Cumulative: 1/3 first half of course, 2/3 second half of course.
You are responsible for ALL required readings and lecture material. Please do not ask me by email or
in office hours for more detailed information about the exam. I cannot disclose information to
individuals that is not available to everyone.
For the earlier material, review your midterm preparation. For the new material, review the following
topics:
Review questions:
1. Discuss the interaction between technology adoption, energy use, and rising incomes
globally.
a. Different models of technology adoption
b. Energy use increases with income
2. Describe the main equity issues related to achieving global reductions in greenhouse gas
emissions.
a. Refer to lecture 14 and section 9 notes
b. First issue: Historical responsiblity and second issue: per capita basis of equity
c. Issues related to achieving the global reduction of emissions and how the north can
invest in the south to reduce emissions
d. On a historical basis
3. Define and discuss the concept of full cost water pricing.
a. Lecture 15: full cost of water includes marginal private cost (extraction cost)
b. Important and different from other goods; cost of water includes marginal
conveyance (transportation) cost and storage cost plus one more component
4. Explain the main rights challenges related to water allocation and discuss the potential
benefits of water trading in this context.
a. Lecture 15
b. Main water allocation scheme is priority; first come first served principle; based on
seniority of users
c. Does not allow trading use it or lose it
d. Lots of potential benefits of trading
i. For example, with trading Price of water more likely to approximate marginal
cost of water and reflect the scarcity of water
ii. Transaction costs involved
1. Trade only desirable if gain > transaction costs

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e. conservation
Describe Ricardos land model and explain how the Leftover Principle determines the
distribution of benefits from land use. In this framework, who benefits from higher farm
productivity and why?
a. Lecture: Land 16
b. Basic idea of model is that competition of farmers for good land will eat up all the
rents of good land until zero economic profits
c. If productivity of land increases, only land owners benefit
i. Most benefit of land use goes to land owners
Using the concept of bid-rent function, explain the von Thunen model of urbanization and
differentiated land use.
a. Probably Lecture 16 also
b. As distance from city center increases, rents decrease
c. Based on the transportation cost
d. Von Thunen model talks about three different types of uses for lands
i. Offices have steep slope for bid rent function
ii. Manufacturing next steepest
iii. Residential land function has flattest bid rent function
e. Same lecture as Ricardo Model
Describe how a conservation NGO could provide incentives for farmers to preserve water
quality (e.g. for trout or forest habitat). Why dont we see more of these initiatives?
a. GSI Couldnt find the answers
i. Could be related to Lecture 15 on water
ii. Could be related to Lecture 21
1. NGO can pay for farmers to preserve own water
b. Its difficult to set a price for water trading scheme
Define the three main types of pesticides and discuss their use patterns over the last two
decades.
a. Insecticides
b. Fungicides
c. Herbicides
d. Lecture 23
Explain the logic of modeling soil as a capital good and discuss soil policies designed to
promote agricultural sustainability.
a. Lecture 17 Agriculture
b. Soil is a durable good; lots of reasons to preserve soil
c. Can make investment in soil (durable good) and get long term returns
d. If you dont make an investment, soil will depreciate like durable goods
Some people believe there is global rivalry between biofuel development and food security.
Explain this reasoning and evaluate the evidence.
a. Lecture 18 biofuel
b. If we allocate more land that was used for food to biofuel, raise the price of food and
cause food security problems
c. the supply of biofuel can expand lots of room for expansion
d. the tension between biofuel and food security doesnt seem to be a major issue based
on evidence so far
Define life cycle emissions accounting and discuss its importance for biofuel policy.

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a. Lecture 18 biofuel
i. Life Cycle Assessment
ii. biofuel emissions from birth to death
b. life cycle assessment doesnt favor biofuel in emissions
i. biofuel itself could probably produce more emissions based on the life cycle
assessment
c. there are other ways to reduce emissions through innovation; new technology
d. on slide about limitations of life cycle assessments life cycle emissions
accounting
i. advantage of biofuels
ii. biofuels could possibly be beneficial to reducing emissions
What is Indirect Land Use, how is it relevant to biofuels, and what evidence links the two.
a. Lecture 18
b. Three parts
i. Indirect land use: define it; lecture notes
ii. Link indirect land use to biofuels; lecture notes
1. Sugar cane; corn; farming land; related to biofuel and we have to take
this into account
iii. What Evidence is there? Add one sentence evidence: also in lecture notes
Discuss biotechnologys contribution to higher agrifood productivity, including evidence on
adoption for leading crops.
a. In biotechnology lecture
b. Two parts: answer both
i. Contribution to agrifood productivity
1. Summarize stuff like pesticide usage improving yield and capital(?)
ii. Talk about rice, wheat, soybeans
Discuss the evidence on positive and negative health impacts of deploying pest resistant
GMO crops.
a. All ingredients for answer in lecture notes
i. But not copy+paste answer
ii. May have to summarize / synthesize lecture notes for answer
b. Increase yield; negative impacts too
What is the Precautionary Principle, how is it applied to GMO crops, and why. Explain why
both in terms of environmental risk and political economy.
a. GSI guesses that this might be a long essay question 5 paragraph essay
i. Could be 2 sentence paragraphs have to demonstrate understanding of the
material
b. First define Precautionary Principle
i. Not in lecture notes google it or find a paper
c. Lecture notes on GMO crops: trade off with risk and benefit on GMO crops
i. Risk versus another risks
ii. Lecture 19 good summary of the arguments; read carefully and summarize
d. Environmental risks and political economy
i. Cede property rights
ii. market access values for export
iii. smaller crops?
iv. Unclear?

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v. Some help in lecture notes but also add in own thoughts

Fairness is a big issue in the GMO controversy. Discuss these three examples: Seed property
rights, Small crops, Market access barriers for exports.
a. Environmental risks and political economy
i. Cede property rights
ii. market access values for export
iii. smaller crops?
iv. Unclear?
v. Some help in lecture notes but also add in own thoughts
b. Maybe a long essay question
c. Lecture notes could help but also need own thoughts
What is state of current knowledge regarding species loss and why should we care?
a. Many slides in lecture notes;
b. Talk about
i. Define biodiversity
ii. Talk about where we are now
iii. Why should we care about preserving species loss
c. Lecture 20?
Discuss the basic valuation challenge for biodiversity and critique three examples of attempts
to overcome it.
a. Different question from problem set 4
b. Discussion about this in Lecture 20
c. Talk about
i. First, challenges to measure or identify mechanisms in this
ii. Difficult to measure benefit of biodiversity
iii. Three examples of overcoming challenge
1. Four examples in lecture notes
a. Use values
b. Option values
c. Resistance values
d. Request values
2. Pick 3
Discuss human impacts on biodiversity and compare this to other animal species.
a. Lecture 20 --- biodiversity; no direct discussion on this though
i. Why are humans so bad
ii. Destroy forest, kill animals
iii. Human effects on ecosystem and biodiversity in various ways
1. We use fossil fuels; animals have never used this
iv. Why humans have significant impacts on the ecosystem that other animals
dont
b. Could be long answer
Define and describe the dynamics of the Predator-Prey cycle.
a. No definition? In lecture notes
i. Explain is not enough, so we have to define it
ii. Find it on Internet
b. Dont need to write down the equation
c. Lectures Explaining the dynamics
i. Which Lecture ????? so annoying she doesnt say

21. Define ecosystem services and give five examples of them you have experienced personally.
a. Find this in PES (payment for ecosystem services) lecture; we can define ecosystem
services
b. Personal experiences necessary; section notes also helpful here, which ones?
i. Rely on section notes on PES
22. What is the fundamental market failure with respect to ecosystem services and how can
payments mechanisms overcome this?
a. Almost basically copy and paste from lecture notes: two slides in Lecture 21 that talk
about this
23. Discuss the main challenges for financing PES and give examples of policies that are
intended to achieve this.
a. PES Lecture
b. As opposed to the previous question, talk about mechanisms do it
c. Challenges: set up costs; payments to provides; running costs
i. Through NGOs or Governments
ii. In slides
d. Challenges: components that need to be financed
i. Negotiating payments; negotiation with actors
ii. Challenges for NGOs vs challenges for Governments
e. Also Development lecture and Trade Lecture maybe
24. It is sometimes said that rural low income people are more likely to be poor in land but rich
in natural resources. What does this statement imply about property rights and income
distribution?
a. This means that this is low productivity land but has natural resources
b. People who own land vs people who own natural resources in a country
c. Land has lower returns but nat resource has high returns?
d. Acquiring rents from natural resources is difficult so theres a further concentration of
wealth
e. Relates to Development lecture; not a direct discussion of specific statement
25. Give your own rational explanation, relying on economic reasoning, for lower environmental
quality in lower income countries.
a. This might be a longer answer question
b. Focus on; think about income effect on demand; theres an income effect;
i. Low income countries can only afford to address the most severe
environmental problems
ii. Richer countries can afford to develop policies to combat environmental
problems
c. Another aspect is thinking of behavior, markets, and institutions; trade
i. Discussion of this in lecture slides (development lecture?)
ii. Environmental regulations may not exist / be enforced in lower income
countries
iii. Trade -- the triangle in trade lecture ; globalization vs sovereignty vs
environmental protection
26. What is the Environmental Kuznets Curve, what is its empirical significance, and how can
this evidence be misinterpreted?
a. Discussion in lecture; Development Lecture

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Inverted U-shaped curve related income per capita and environmental emissions
Explain what this relationship is; maybe draw a graph
Whats the empirical evidence
Misinterpret: correlation does not equal causation
i. Difficult to separate Impact of growth from impact of technology
ii. Generalizing this as a rule can lead to misinterpretation
How can traditional large investment project design, development, and implementation be
improved to reduce environmental and other social risks?
a. Discussed in Development Lecture
b. Focus on Section for traditional project vs new project
i. Feedback mechanism?
Recognizing that a primary role for governance is intervention to reconcile divergent public
and private interests, explain the importance of institutional weakness to environmental
outcomes in developing countries.
a. Lecture on Development
i. Discussion to some extent on this
b. maybe institutions in developing countries are more vulnerable to political economy
challenges
i. legal systems
ii. if there arent strong laws on compliance and strong punishments for
violation, there may be low compliance and consequently adverse outcomes
One of the most serious forms of institutional weakness is corruption. Define it and discuss
necessary conditions.
a. Discussion of this exactly in lecture slides Development Lecture
i. There is a definition and a slide that says necessary conditions
What is a Pollution Haven?
a. Explained in lecture; Trade or Development lecture, I think trade
i. Not explicitly stated but its discussed
b. Race to the bottom in trade
c. countries that dont improve standards
i. set environmental standards below socially optimal levels in order to attract
business or spur growth
Globalization was supposed to help the poor, but the evidence suggests otherwise. Why?
a. Lecture on Trade
b. Could be a long-answer question
c. Competitive advantage idea
d. if you have a country open to trade, everybody is supposed to gain from trade
e. who loses, who gains?
f. Poor people in Pollution intensive production countries may be losers in trade
i. Also the environment and future generations
g. In free trade, the country specializes (and returns rise) in abundant factor production;
scarce factor production returns fall
i. So this creates winners and losers too
Give three examples of adverse environmental consequences of international trade.
a. Keep in mind pollution havens; countries providing waste disposal services;
specializing in pollution intensive services