____________________________________________

__________________________________
EC 307- F-F & Online Summer Flexi
RESOURCE AND ENVIRONMENTAL ECONOMICS
Tutorial 1 – Topic 1: Introduction to Resource and Environmental Economics
(Textbook Ref: C &T; Chapters 1 and 2)

Question 1
State how each of the following factors affects the materials balance model:
a. (i) population growth; (ii) income growth; (iii) increased consumer recycling actions; (iv)
increased industrial recycling; (v) increased use of pollution prevention technologies.
b. Using the data in Table 1.2, graphically illustrate the relationship between a country’s per
capita GDP and its per capita municipal waste generation. What conclusion can you draw
from your graphical analysis?
Question 2
Discuss what is meant by the market premise operates under the "polluter-pays principle."
Question 3
Describe a real-world government policy that creates a market surplus and explain the efficiency
implications and rationale for such a policy.
Question 4
Discuss using examples of how the System of National Accounts endorsed by the United Nations
fails to properly capture activity that harms the environment. Now, suggest a way to
quantitatively correct the flaw in the particular case that you described.
Question 5
Explain two economic incentives that would encourage firms to research and implement “design
for recycling” programs.
Question 6
Suppose the market for organically grown wheat is modeled through the following market
supply and demand functions:
P = 10 + 0.5QS and P = 22 ‒ 2.5QD,
where QS and QD are in millions of bushels, and P is price per bushel.
a) Find the market equilibrium price, PE, and market equilibrium quantity, QE.
b) Compute the value of producer surplus and consumer surplus at equilibrium.
Question 7
Reconsider the implications of the revised labeling standards discussed in Question 2 in
the context of the hypothetical market for bottled water modeled in the text.
Recall that the market demand and market supply equations are.
QD = –100P + 1,150 and QS = 400P – 100,
where PE = $2.50 and QE = 900.
Now, suppose the change in standards results in a new market supply of QS’ = 400P –
350, with no change in market demand.
a. Determine the new PE’ and QE’ for bottled water. Do your results agree with your
intuitive answer to Question 2 (Question 2 in the textbook p. 50 under Review
Questions?
b. Graphically illustrate the market for bottled water before and after the change in
labeling standards. Be sure to label all relevant points.
c. Compare the values of consumer surplus and producer surplus before and after the
change in labeling standards. Is this result expected? Why or why not?
Question 8
In the competitive market for organic corn, market demand is QD = 340 – 2P and market supply
is QS = 100 + 4P, where P is the price per bushel, and Q is market output in thousands of
bushels. Each individual farmer faces a marginal cost function of MC = 10 + 3q, where q is the
single farmer’s output level in thousands.
a) What is the equation for the demand (which is also MR) faced by the individual farmer?
b) Based on your answer to part (a), find the profit-maximizing output level for each farmer.
c) At an output level of 8 thousand bushels, explain in terms of both marginal profit and
total profit why the individual farmer should expand production.

***The End***