Africa Beza College

Hawassa Campus
Department of Economics
MSc regular Economics students
Individual Assignment
for Assignment II

Natural and Environmental Resources of Economics

Name: Abrham Jigso

ID: 008/2012
Year 1 Semister 2

Submitted To:DEBELLA (Phd)

Email debelag@gmail.com

In AUGEST-2020
Hawassa Ethiopia

Assignment II on Natural resources and Environmental Economics

Instruction: This assignment is based on chapters three and four of our course. The material
provided can be used as a good source document. Read the slides before you try to answer
the questions.

1. Distinguish the different types of property rights

2. Distinguish between private property, common property, public property and open
access
3. In which type of property is efficiency maximized
4. Define market failure
5. What are the causes of market failure
6. Distinguish between negative and positive externality
7. Distinguish renewable resources with and without storage possibility and give
examples Distinguish the
1.Distinguish the different types of property rights

i. .Use right:.this is the most observable types of property right ,either to non-
consumptive or withdrawal of the resource .
ii. .Managmentright;.it has an order higher than use rights $ are intermediate between
use and full ownership (including transfer rights .it consists of the rights to organize
and assign use rights.
iii. .Transfer rights;.Transfer right exist at a still higher order than use and management
rights. Transfer right refer to the authority to assign or reassign both management
and use rights.
Iv .Ownership right ;.is neither precise nor –rigorous .concept of ownership may vary
depending up on the socio-political context. Examplewesterners;ownership =use
rights+management rights +transfer rights +isolation rights. A non-westerner;
ownership =use rights +management right .
.2. Distinguish between private property, common property, public property and open
access

i. Private property occurs when the strands of the property rights bundle are held by a
natural or legal person. It is an efficient type of property right
ii. Common property exists where property rights strands are shared among members of a
community, ethnic groups or associations. Its efficiency depends on common laws and common
respect of the law.
iii.Public property is established when the strands of the bundle are concentrated,
held and managed by the government. Its efficiency depends on the rules and
regulations and common understandings with society.
iv. Open access (it is also called Res Nullius) occurs where either no specific rights to land or
natural resources have been assigned or claimed by holders.
• The structure of property rights which can result in efficient allocation of resources in
a well-functioning market economy has four main characteristics. These are.
 1. Universality- refers to all resources are privately owned and all entitlements are
completely specified.
• 2. Exclusivity/excludability- refers to all benefits and costs created as a result of
owning and using the resources should accrue to the owner and only to the owner,
either directly or indirectly by sale to others. 3. Transferability-refers to all property
rights should be transferable from one owner to another in a voluntary exchange. 4.
Enforceability- refers to property rights should be secured from involuntary
seizure or encroachment by others. The owner of a resource has the right to practice the
above characteristics of well-defined property right.
• For example, a farmer who privately owns the farm has an incentive to fertilize and
irrigate it because the resulting increase in production increases his income level. In
addition to this, he has an initiation to rotate crops to increase the productivity of his
farm. Exchange of a well-defined property rights facilitates efficiency.
• One can explain this fact by observing the incentives consumers and producers face
when there is a well-defined property right.
•
3. In which type of property is efficiency maximized?
.Open access

4. Define market failure

Despite the advantage of pricing system for making decisions on the production and
consumption decisions, the price system does not always work nor is desirable to depend on it.
In one way or another it may fail to reflect exact values of goods and services.
5.What are the causes of market failure

 Public goods
 Externality
 Improperly designed property rights
 Market power
 Information asymmetry
6. Distinguish between negative and positive externality
Negative Externality
• Pollution
• Cell phones in a movie theater
• Congestion on the internet
• Drinking and driving
• Student cheating that changes the grade curve

• Negative Externality: occurs when an economic activity causes a damage/cost on

external parties. In negative externality, the firm/industry is over produce seeking
high benefit.
  Positive externality: an economic externality may also offer a benefit to individuals
who do not participate or have any role in the production & do not pay for the
unconscious benefit once obtained.

• In the case of positive externality, the firm obtained less benefit as compared to his
activity because some benefits are moved to external parties.
Ex: a farmer who produces an apple provides positive externality to a beekeeper ( The bees will
get good source of nectar.

• Research & development

• Vaccinations
• A neighbor’s nice landscape
• Students asking good questions in class
7.Distinguish renewable resources with and without storage possibility and give examples
Distinguish the

Renewable resource regenerates itself where as non- renewable resources are fixed in quantity.
• Renewable Resources without storage possibility ;. This class of resources
incorporates solar radiation, wind-tide and scenery which are typically the most flow
resources. The flow from these resources may increase, decrease or be constant. The
current use of these resources does not deteriorate their future flow. For these resources
uses can be maintained forever if flow continues.
• However, Substitution of the resources from one period to another period is
impossible. (can not be stored)
• In other words, the output from this type of resources cannot be stored.