NAME AND SURNAME : SINETHEMBA AYANDA

STUDENT NUMBER : 66739160

UNIQUE NUMBER : 622138

1.

Industry Supply Curve under Competitive Conditions:

Under competitive conditions, each firm in the industry is a price taker. This means
they cannot influence the market price of the product by adjusting their individual level
of output. The industry supply curve is derived by horizontally summing the supply
curves of all the individual firms in the industry.

Equimarginal Principle:

The equimarginal principle is an economic principle stating that consumers and

producers will distribute their expenditures (or resources) in such a way that the
marginal utility (or marginal product) per unit of expenditure (or resource) is the same
for all goods and activities. In simpler terms, you'll keep allocating resources to
different activities as long as the marginal benefits are the same across all activities.

Relationship:

When individual firms decide on the level of output to produce and sell in a competitive
market, they will do so based on the principle of equating marginal cost (MC) with the
given market price (P). Since they are price takers, the market price is also their
marginal revenue (MR). Thus, they will produce up to the point where MC = MR = P.

The equimarginal principle can be observed here. Each firm will continue producing
additional units of output as long as the marginal benefit (in terms of revenue, MR) of
doing so is greater than or equal to the marginal cost. When these are equal, the firm
has allocated its resources in such a way that the marginal benefit per unit of resource
(price received for an additional unit of output) is the same as the marginal cost of
producing that additional unit.

When deriving the industry supply curve by summing up the supply curves of
individual firms, the equimarginal principle can be seen at play. At any given market
price, each firm in the industry has equated its marginal cost to that price, resulting in
a certain level of output for the firm. By adding up the outputs of all firms at that price,
we get the total quantity supplied in the industry.

In conclusion, the procedure of deriving an industry supply curve under competitive

conditions reflects the equimarginal principle. Each firm, acting as a price taker,
equates its marginal cost with the market price, ensuring an optimal allocation of its
resources.

A public good is typically defined by two main characteristics: non-excludability and

non-rivalrous consumption.

• Non-excludability: This means that once the good is provided, no individual can
be excluded from using it. If one person uses the good, others can't be stopped
from doing so as well.
• Non-rivalrous consumption: This implies that when one person uses the good, it
does not reduce the amount available for someone else. The consumption of
the good by one person doesn't prevent or decrease the consumption of
another person.

Criteria to a library:

• Non-excludability: In many cases, libraries (especially public libraries funded by

tax revenues) are open to all residents of a community, and people cannot be
easily excluded from using the facility. However, some services or resources
within a library might be excludable, such as borrowing books which might
require a membership or residency.
• Non-rivalrous consumption: Using the library, in general, does not prevent
others from doing so. However, certain physical resources within a library can
be rival in nature. For instance, if one person checks out a particular book,
another person cannot borrow that exact copy until it's returned. Yet, reading a
 book within the library or using the space doesn't diminish the ability of others
to do the same, at least until the library's capacity is reached.

3.

Just because there is an oil spill caused by a tanker accident in the coastal waters of
South Africa in the year following the introduction of a new navigation rule doesn't
necessarily mean that the law has had no impact. Here's a more nuanced approach to
understanding the scenario:

• Frequency of Incidents: One way to assess the impact of the law would be to
compare the frequency of accidents before and after the implementation of the
law. If there were multiple spills each year before the law and only one after its
implementation, then the law may have had a positive impact despite the recent
incident.
• Severity of Incidents: Another aspect to consider is the severity of the spills. If
the spills that occurred before the law were much larger and had more
detrimental effects on the environment, but the spill after the law was of a
smaller scale, then the law might have played a role in mitigating the
consequences of such accidents.
• Causal Factors: It's essential to evaluate the specific cause of the spill. Was it
directly related to a violation of the new navigation rules, or was it due to some
other unrelated factor? If it was the latter, the spill might have occurred
regardless of the law.
• Compliance and Enforcement: Just because a law is in place doesn't mean it's
being adequately enforced or complied with. The spill could indicate issues with
the implementation or enforcement of the law, rather than the law's efficacy
itself.
• Other Benefits: The law may have other benefits that aren't immediately
observable in the context of preventing spills. For instance, the new navigation
rules might have led to more efficient shipping routes, reduced close calls, or
improved coordination among ships, which, while not eliminating accidents
altogether, might still represent progress.

4.
• Technological Impact vs. Legal Impact: The introduction of a new technology
that reduces emissions does not directly speak to the effectiveness or impact of
any pre-existing law. The law and the technology serve different roles. A law
might set the standards or limits for emissions, while technology provides a
means to achieve or exceed those standards.
• Enhancement of Compliance: If a law requires breweries to reduce emissions,
the new technology could make it easier for them to comply. In this case, the
availability of the technology complements the law. Without the legal framework
compelling the breweries to reduce pollutants, they might not have an incentive
to adopt the new technology.
• Technological Adoption Might Reflect Weaknesses in the Law: If breweries
rush to adopt the technology even without a legal push, it might suggest that
the previous legal framework was not stringent enough or was not effectively
enforced. The breweries could be foreseeing stricter future regulations or are
trying to gain a positive public image for being environmentally responsible.
• Indirect Effects of the Law: Laws can have indirect impacts. Even if the
breweries didn't reduce emissions immediately after the law was enacted, the
law might have spurred research and development, leading to the creation of
the pollution-reducing technology.
5.

INTRODUCTION

To estimate the willingness to pay (WTP) for non-marketed environmental benefits

such as improved health or better visibility, various techniques have been developed.
Two major methods to estimate WTP for improvements in environmental quality
include:

1. Contingent Valuation (CV):

Description:

Contingent Valuation is a survey-based method that directly asks respondents how

much they would be willing to pay for a specific environmental service or benefit.

Procedure:

• Individuals are presented with a hypothetical scenario, typically describing a

change in the level of an environmental good or service.
• They are then asked how much they would be willing to pay (or accept) for that
change.

Advantages:

• Can be tailored to address very specific scenarios or policy changes.

• Allows for direct assessment of people's values.

Limitations:

• Prone to various types of biases (e.g., strategic bias, hypothetical bias, starting
point bias).
• Requires careful survey design and piloting.

Applications:

• Used in numerous environmental damage assessments and benefit-cost

analyses.
• Can address diverse environmental goods and services, ranging from improved
water quality to the preservation of endangered species.
 2. Hedonic Pricing Method (HPM):

Description:

Hedonic Pricing evaluates the value of environmental attributes by examining how

these attributes affect the market prices of related goods or services.

Procedure:

• Most commonly applied to housing markets, where house prices are seen as a
function of various attributes including the quality of the local environment (e.g.,
air quality, noise levels, proximity to green spaces).
• By statistically analysing variations in house prices and correlating them with
differences in environmental qualities, the implicit price or value of those
environmental attributes can be derived.

Advantages:

• Uses actual market data, which means it captures real-world decisions and
trade-offs people make.
• Can be less susceptible to some of the biases inherent in CV.

Limitations:

• Assumes that people have perfect information about environmental attributes

and their effects.
• Requires strong statistical and econometric capabilities.
• It is limited to environmental attributes that can be reflected in market prices.
Applications:

Widely used to assess the value of urban amenities and disunities, including air and
water quality, noise levels, and proximity to parks or natural areas.

In conclusion, Contingent Valuation and Hedonic Pricing Method provide two

different angles to approach the complex task of valuing intangible environmental
benefits. CV directly assesses people's values through surveys, while HPM examines
how those values are implicitly reflected in market prices.