Africa Beza College

Department of Economics
Assignment two on Natural Resources and Environmental
Economics

Prepared by: Amare Zewude

Id no: 029/12

Submitted to: Debela G. (PhD)

E-mail:debelag@gmail.com

June 2020

Hawassa,Ethiopia
1. Distinguish the different types of property rights
 Use right: This is the most observable types of property right, either to non-consumptive
or withdrawal of the resource.
 Management right; 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.
 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.
 Ownership right; .is neither precise nor –rigorous .concept of ownership may vary
depending up on the socio-political context. Example westerners; 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?

 Positive and negative externalities, environmental concerns, lack of public goods, under
provision of merit goods, overprovision of demerit goods, and abuse of monopoly power.
6. Distinguish between negative and positive externality
 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.
 Positive externality
Public goods
Externality
Improperly designed property rights
Market power
Information asymmetry
 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.
Negative Externality
Pollution
Cell phones in a movie theater
Congestion on the internet
Drinking and driving
Student cheating that changes the grade curve

• 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
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.
(cannot be stored)
• In other words, the output from this type of resources cannot be stored.