ECON 3810 Midterm
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ECON 3810 Midterm
Question 1
A) The project does not meet the Pareto criterion. The Pareto criterion is to make at least one person's utility become greater without letting other people's utility become less. In this project, it is obvious that it has made some environmentalists less effective. Therefore, it does not meet the Pareto criterion.
The project meets the Kaldor-Hicks Compensation Criterion. The Kaldor-Hicks Compensation Criterion is to say if the total benefit brought by the project is greater than the total loss. The benefiting party can give the injured party appropriate compensation, and eventually everyone's situation will be better. Here, the government and project parties can compensate environmentalists to a certain extent, such as providing special funds for animal protection.
The project meets the welfare function standard. The welfare function means that if the overall benefit of an event is greater than zero, then the event will be considered beneficial. In this project, the provincial government, workers, and enterprises will all benefit, and only environmentalists and the fishing industry may suffer losses, so the overall benefit is greater than zero.
B) We can evaluate the cost and benefit of this project. advantage:
1) Many jobs can be created. Project construction and operation can create more than 3,000 new jobs;
2) GDP can be increased. GDP is considered to be a simple indicator to measure social benefits, although it has shortcomings;
3) It can benefit consumers. The increase in oil supply will inevitably lead to a drop in the price of oil, and ultimately consumer surplus will increase;
4) It will increase taxes in several provinces. These increased taxes can be used as funds for
many public projects.
shortcoming:
1) Leakage will inevitably occur during oil transportation, which will pollute the marine environment and cause many fish to die;
2) As an industrial raw material, petroleum will increase greenhouse gases when used, thereby exacerbating climate warming;
3) Many environmentalists are dissatisfied with such projects.
By comparing the cost-benefit of the project, we found that this project is generally beneficial. So this project is worth implementing.In fact, some losses can be recovered, such as oil spills. We can reduce the possibility of such incidents by improving transportation technology. With the increase of greenhouse gases, we can invest more money in planting trees to absorb these more greenhouse gases.
Question 2
A)
b) When assessing the total welfare of society, if we only consider consumer surplus, then we will ignore the various costs required to produce goods.
C)
Question 3
A) It belongs to the Utilitarian welfare function. There is a problem in practical applications, that is, each person's a is difficult to determine and subjective.
B) Ui represents the utility obtained by each person.
C) I will choose the Utilitarian welfare function above.
D) In the Rawlsian welfare function, the overall social welfare depends on the individual with the least utility. In this kind of welfare function, to improve the overall utility, the situation of the weak must be made better. This inspired us to think about the original intention of social welfare, which was originally meant to help the weak.
2021-12-20