(1) Resources

First chapter after midterm

demonstrated resources

quality, quanitity, location estimated by geological evidence and engineering methods, measured, indicated, inferred

identified resrouces are___ and ___ ??

demonstrated, inferred

demonstrated identified resources are __ and ___

measured & indicated

undiscovered resources

surmising on the basis of geological knowledge and theory abt conditions in which specific resources are found

Why is economic supply of a nonrenewable resource different from its physical supply? -- we have coal but if it costs a lot to extract it, then not worth it

economic feasibility

hubbert curve

bell-shaped curve showing the production quanity of a nonrenewable energy resource over time

expected resource lifetime = what?

economic reserves/annual consumption

How should we allocate limited resources between current and future periods?

analyze consumption trends

Hotelling's Rule

theory stating that in equilibrium the net price (price muns production costs) of a resource must rise at a rate equal to the rate of interest

marginal extraction cost

cost of extracting an additional unit of a nonrenewable resources

scarcity rent

marginal opportunity cost imposed on future generations by extracting one more unit of a resource today

when is efficiency achieved?

when the resource price -- the benefit society is willing to pay for the resource today -- is equal to the sum of marginal extraction cost and scarcity rent

Choke price

minimum price on a demand curve where the quantity demanded equals zero

What do you think happens when a resource reaches its choke price?

price so high, no quantity is extracted

Stage 1: prices reducing and extracting increasing?

Stage 2: prices almost stable, extraction/demand increasing steadily

Stage 3: demand presses upon availability and prices start to rise

Stage 4: Choke Price

Why has recycling become an economically viable option?

-Stage 4: supply from recycled materials increases compared to decreasing suppling supply from virgin resources ( the choke price)
-low energy costs
-delay production w/ high priced substitute material

Second Law of thermodynamics

physical law stating that all physical processes lead to a decrease in available energy, an increase in entropy

What does the second law of thermodynamics have to do with recycling?

some loss or degradation of material will always occur during the process of fabrication, use and recycling
-recycling also requires new inputs of energy

If we want to increase cycling to 60%, what should we do?

-add a tax to increase recycling
-virgin would be too expensive

Ways to promote recycling?

-altering public policies that encourage rapid resource extraction
-imposing taxes on the use of primary resources
-combining market incentives for recycling with measures to promote the technology and infrastructure needed for recycling systems
-municipal programs and institutions to promote recycling
-consumer incentives such as deposit/return systems or pay-by-the-bag rules for collecting non-recyclable garbage

On what basis will you evaluate different energy sources? What criteria will you use to choose an energy source?

-price
-initla costs
-availability of resource
-efficiency of prdocution
-economic incentives
-net energy
-suitability

Things to consider within sources of energy

price, availability, environmental impacts, net energy, suitability

net energy ratio

higher value means we can obtain a significant amount of available energy without using much energy to obtain it

for every 1 unit of energy we put in, we get x units back; x = net energy ratio

levelized costs

per-unit cost of energy production, accouting for all fixed and variable costs over a power source's lifetime
-not considering negative externalities
-only looking at initial & maintenance costs

Energy Subsidies

gov around world have provided to lower price of energy paid by

direct payments or favorable loans

-gov. will provide loan or allow market interst loans
-pay a per unit subsidy or below market interest loan

tax credits and deductions

-can claim tax credit for recovery for capital investments
-deletion allowances

price supports

-fees & tariffs? gov. make sure the price of renewable energy is agreed upon price not met with (not driven by market)

mandated purchase quotas

law requires gov. to use a certain type and percentage of energy

pigovian tax -- on negative externalities

-per unit tax set equal to the external damage caused by an activity, such as tax per ton on pollution emitted equal to the external damage of a ton of pollution
-to generate revenue

renewable energy credits

certificates granted to renewable energy producers

right to know laws

disclosure by power generators abt emissions

monopoly

firm that is the sole seller of a product without close substitudese

ex of monopolies

electricity companies, pharmaceuticals, big companies (google, disney)

key difference btwn competitive firm and monopoly

monopoly's ability to influence the price of its output

competitive firm is small relative to the market in which it operates... therefore what

has no power to influence the price of its output

what price and quantity of output will the monopolist choose?

monopoly's revenue

monopolist's marginal revenus is always what

less than the price of its good

profit = __ - ___

TR - TC

maximizing profit

MR = MC

deadweigh loss

area of triangle btwn demand curve & marginal-cost curve

what does the demand curve reflect

the value of the good to consumer

what does the marginal cost curve reflect

cost of the monopoly producer

oligopoly market structure/oligopolistic market model

market which has few producers and large number of buyers which gives these producers an advantage to control the market

OPEC: oligopolistic market model controls what

approx 80% of world's oil reserves and 40% of world's production among 12 member states