Description
1) a. Show (graphically) and explain (verbally) the theoretical land price gradient between commercial, residential, and agricultural uses of lands. (7 points)
b. What factors in Colorados Front Range might influence the land use mosaic we actually observe? (5 points)
c. Discuss how conservation easements are used in Colorado private lands conservation and what sort of public and private benefits are conserved with this tool. (8 points)
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2) Consider the following illustration of land rents for alternative land uses. The farmer is the landowner and she would like to sell her land.
a) Calculate the land value per hectare in farming (W, Y) and in housing (X, Z) from the farmers and societys perspective. (5 points)
b) What is the economically optimal land use from the farmers perspective? societys? Why? (5 points)
c) Provide three examples from class lecture of positive externalities to society from low density (recreational, agricultural) land use relative to private benefits of high density (e.g, residential, commercial) land use. (5 points)
d) What are at least 3 potential policy alternatives available to society (local government or civic organization) to achieve the societal optimum and who gains/loses by how much by employing these options? (5 points)
A.
Land use Farmer Society
Annual land rents
Ag 500 1500
Housing 1000 1000
Land price per hectare (r=0.10)
Ag W= Y=
Housing X= Z=
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3) Municipal water supplies are often managed by a government agency. Typically, government agencies are not allowed to make a profit.
a) Assuming supply and demand behave normally, graphically illustrate the implications of a governmental cost recovery mandate on the water market. (10 points)
b) Precisely identify the welfare effects of water management under these conditions relative to profit maximization. Use the concepts of Marginal Cost, Marginal Benefit, Average Cost, Average Benefit, Total Cost and Total Benefit in your answer. (10 points)
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4) a) Water rights, markets and rates are often tied to their intended use (e.g. commercial, agricultural, and residential) and out of use or out of basin water transfers are often prohibited. Why? (5 points)
b) Graphically and mathematically demonstrate how creating a market for trading water rights across uses (residential vs agricultural) could potentially increase the welfare (economic efficiency) of water allocation decisions. Assume water prices are high in residential use and low in agricultural use. (15 points)
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5) A) Provide a graphical illustration and interpretation of peak load pricing when there are two classes of visitors to Lory State Park (say high season and low season visitors). B) Discuss two policy alternatives available to manage visitors when demand can exceed capacity at times, but not always. C) Demonstrate graphically when the alternative results in (short term, seasonal) profits to the park. D) What might be done if the Park Service is a nonprofit government agency?
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6) A) Show (graphically) how local and nonlocal interests might differ in assessing the desirability of a project or policy. B) Discuss the issues that create this divergence of interest.
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7) Consider a typical graphical model of market supply and demand as applied to the market for two endangered species products: rhino horn and elephant tusk (two separate markets). A global ban on the trade of endangered species products has been imposed. This is likely to affect both the demand and the supply for both products. The demand for rhino horn is relatively inelastic, since relatively few close substitutes exist. The demand for elephant tusk is relatively elastic, since good substitutes exist. A) Graphically illustrate in which market you would expect a ban to be successful and explain why. (15 points) B) What alternatives to a ban are there that might improve the effectiveness of the policy to reduce the trade in endangered species products? (5 points)
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8) A) Show and discuss the economics of land reform policy to redistribute agricultural lands across two equal groups of farmers. Assume the two groups have the same human capital in terms of farming (same Marginal Product curves) and that the amount of agricultural available land is fixed and constraining. (5 points) B) Find the agricultural output maximizing allocation of land between the two groups. (5 points) C) Show graphically that any other allocation of land will result in lower total output. (5 points) D) Discuss the output per person in each group under both scenarios and why a sub-optimal distribution of land might persist. (5 points).
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9) A) Provide a graphical illustration of subsistence agriculture and deforestation where land area deforested is the independent (decision) variable, output (in biomass or $) is the dependent variable, marginal product of converted land is horizontal (for simplicity) and marginal costs are increasing. (5 points) B) Define the amount of land deforested where MC=MP1 as the level of deforestation required to provide a subsistence income to the household. (5 points) C) Identify the producer surplus at subsistence. (5 points) D) Suppose a technological innovation (e.g., a hoe) shifts the marginal product curve upward (to MP2) making it possible to reach subsistence at a lower level of deforestation. Show this new level of deforestation on your graph. Is this the result you expect to observe? Why or why not? (5 points)
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10) A) Provide a fully labeled graphical representation of an export tax on natural resource flows from a small country that is a low cost producer. (5 points) B) How much is supplied in total? How much is supplied to the local market and how much to the international market before and after the tax? (5 points) C) Identify the welfare effect on local producers and consumers and government tax revenues that result from the policy. (5 points) D) Discuss why a government would implement such a policy. (5 points)