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AGEC 350
Lecture #3 – 9/5
Complete parts 1 and 2 of the shower demand worksheet.
Tietenberg pp. 14-23
1. What is the difference between positive and normative economics?
2. For a particular quantity on the horizontal axis, what does the height of the demand curve (Figure 2.3) at that
point mean?
3. For a particular price on the vertical axis, what does the horizontal distance out to the demand in Figure 2.3
indicate?
4. Draw a figure like Figure 2.3 and identify the following:
a. The total willingness to pay for 5 units of the good.
b. The total willingness to pay for 6 units of the good.
c. The marginal willingness to pay for 6th unit of the good.
d. Which is greater, the total willingness to pay for 6 units or the total willingness to pay for 7 units?
e. Which is greater, the marginal willingness to pay for the 6th unit or the marginal willingness to pay for the
7th unit?
5. Define opportunity cost and give an example (other than one provided in the book) of the opportunity cost of an
environmental service?
6. Draw a figure like figure 2.4. Identify the following:
a. The total cost for 5 units of the good.
b. The total cost for 6 units of the good.
c. The marginal cost for 6th unit of the good.
d. Which is greater, the total cost for 6 units or the total cost for 7 units?
e. Which is greater, the marginal cost for the 6th unit or the marginal cost for the 7th unit?
Question based on reading packet pages 7-8 & pages 1-2
7. As discussed in the article, What is one benefit of eliminating DDT. How do we know that this is an economic
benefit? (Hint, you have to use the words “willingness to pay” in your answer.)
8. As discussed in the article, What is one cost of the Three Gorges Dam. How do we know that this is an
economic cost? (Hint, you have to use the word “opportunity” in your answer.)
