1.

Given discrete time path,

1.1. Explain what will happen to resource extraction size and resource rent when the
social discount rate is high.
1.2. Explain what will happen to resource extraction size and resource rent when the
social discount rate is low.
2. Derive the hoteling rule for optimal nonrenewable resource extraction under continuous
time horizon (Hint just start by considering discounted value of marginal utility from
resource extracted will be the same at each point of time “t”).
3. Derive the hoteling rule for optimal nonrenewable resource extraction under discrete time
horizon with only two time periods.
4. Explain the following
4.1. Resource depletion when the resource is depletable but recyclable
4.2. Economic replenishment
4.3. Diffuse resource
4.4. Point resources
5. Discuss some of the classifications of renewable resources
6. Show the difference in efficient fishing effort size to be exerted by harvesters with clearly
defined property right and harvesters using an open access resource.
7. Show graphically how the rise and fall of marginal cost affect fishing effort and harvest
size.
8. Give an example for local, regional and global pollutant
9. Explain the difference in determining optimal pollution size when the pollutant is fund or
stock pollutant.
10. Consider two consecutive years, labeled 0 and 1. You are currently at the start of year 0.
The following information is available. There is a single fixed stock of a non-renewable
resource; the magnitude of this stock at the start of year 0 is 224 (million tons). The
inverse resource demand functions for this resource in each of the years are P0 = a − bR0
and P1 = a − bR1 in which a = 107 and b = 1. The constant marginal cost of resource
extraction is 5. The social welfare function is discounted utilitarian in form, with a social
utility discount rate of 0.1. Given that the objective is to maximize social welfare over
periods 0 and 1,
 10.1. Calculate the amounts of resource that should be extracted in each period, subject
to the restriction that 104 units of the resource should be left (unextracted) for the
future at the end of period 1.
10.2. Calculate the resource price in each period.
10.3. Calculate the resource rent or royalty in each period and show if it is growing at
the rate of the social discount rate.
11. Consider three consecutive years, labeled 0, 1 and 2. And assume the available size of
fixed stock of the nonrenewable at the beginning of the initial period is 620 tons. The
demand function is given by Pt = a – bRt where a = 200 and b = 0.5. The constant
marginal cost of extraction is $2. If there will be no resource left at the end of second
period and the social discount rate is 0.1,
11.1. What will be the resource extraction size during each period?
11.2. What will be the gross resource price in each period?
11.3. What will be the resource rent or royalty in each period and show if it will grow at
the rate of the social discount rate?
12. Explain how marketable and non-marketable pollution permits can be used as a pollution
control instrument.
13. Explain the difference between direct-use value, indirect-use value, non-use value and
intrinsic value.
14. Show how the market valuation approach, replacement cost approach, hedonic pricing,
household production function approaches are used to value the environment.