The Norvale lake fishery

Read the extracts and answer the questions that follow.

Text A — Declining fish stocks

1. Lake Norvale is open to fishing by households from several villages. Fish are rivalrous because a fish caught by one person cannot be caught by another, while excluding additional users is costly. The lake is therefore a common pool resource.

2. Fish catches have exceeded natural regeneration. Each fisher receives the private benefit from an additional catch but shares the depletion cost with all users, contributing to the tragedy of the commons.

Table 1 — Estimated adult fish stock

Estimated adult fish stock in Lake Norvale.

Text B — Management proposals

1. The regional authority proposes a total catch limit supported by tradable catch permits. Village councils instead favour collective monitoring, seasonal closures and locally agreed penalties.

2. The objective is sustainability, although fishers fear that tighter limits will reduce employment and income in the short run.

Table 2 — Current catch and proposed sustainable catch limit

Annual fish catch in Lake Norvale

Mangrove use in Salina Bay

Read the extracts and answer the questions that follow.

Text A — Coastal pressure

1. Mangrove forests protect Salina Bay from storms and provide breeding habitats for fish. Access to some areas is difficult to restrict, while timber and habitat services are depleted by harvesting. The mangroves have characteristics associated with the tragedy of the commons.

2. Commercial operators cut mangroves for fuel and clear land for tourist facilities. The resulting erosion and lower fish catches affect coastal households.

Table 1 — Mangrove forest area

Mangrove forest area in Salina Bay.

Text B — Restoration

1. The government funds mangrove planting and is considering protected zones, harvesting licences and community management. Hotel operators would also pay a conservation levy.

2. Restored mangroves create a positive externality of production because planting by one organization benefits fishers, residents and other businesses.

Table 2 — Annual mangrove planting

Annual mangrove planting recorded before and after the restoration subsidy.

Agricultural runoff in Bellara

Read the extracts and answer the questions that follow.

Text A — Fertilizer use

1. Farms in Bellara use chemical fertilizer to increase crop yields. Nutrients entering rivers cause algae growth, reduce fish populations and raise water-treatment costs. Fertilizer use therefore creates a negative externality of production.

2. The government introduced a fertilizer levy and minimum standards for nutrient-management equipment.

Table 1 — Annual fertilizer sales

Annual fertilizer sales in Bellara before and after the fertilizer levy.

Text B — Cleaner farming

1. Bellara subsidizes soil testing and precision-application equipment. It also funds training that helps farmers reduce runoff without sharply lowering output.

2. Officials face difficulty measuring the marginal external cost because runoff varies with rainfall, soil type and farm location.

Table 2 — Farms adopting precision equipment

Farms adopting precision-application equipment before and after the subsidy.

Pollination services in Virelia

Read the extracts and answer the questions that follow.

Text A — Beekeeping and agriculture

1. Beekeepers in Virelia produce honey, while their bees also pollinate nearby fruit farms. Beekeepers receive no payment for much of this additional benefit. Beekeeping therefore creates a positive externality of production.

2. Colony losses caused by disease and habitat decline have reduced the number of commercial hives.

Table 1 — Commercial beehives

Commercial beehives in Virelia before and after the subsidy.

Text B — Supporting pollination

1. The government offers payments for new hives and finances wildflower corridors. Critics argue that large honey producers receive most of the subsidy.

2. Officials seek allocative efficiency, but it is difficult to estimate the value of pollination across different crops and regions.

Table 2 — Fruit output in participating districts

Annual fruit output in participating districts before and after the pollination programme.

Preventive dental care in Caldris

Read the extracts and answer the questions that follow.

Text A — Unequal access

1. Regular dental checks benefit patients and can reduce infections, school absences and pressure on public hospitals. Preventive dental care is therefore treated as a merit good.

2. Low-income households often postpone treatment because of its price and incomplete information about long-term benefits.

Table 1 — Annual preventive dental visits

Annual preventive dental visits in Caldris before and after the voucher programme.

Text B — Expanding consumption

1. The government introduced vouchers for low-income households and free dental checks in schools. It also funds an oral-health information campaign.

2. These policies aim to reduce the welfare loss associated with underconsumption, but they require additional taxation.

Table 2 — School absence associated with dental illness

School days lost to dental illness before and after the programme.

Night-time noise in Raventon

Read the extracts and answer the questions that follow.

Text A — Entertainment district

1. Late-night venues in Raventon attract customers and employment, but amplified music and crowds associated with consuming the entertainment disturb nearby residents. Customers and venues do not compensate residents for sleep loss and stress. For this question, treat this harm as a negative consumption externality and assume that venue production creates no separate externality.

2. Late-night entertainment is consequently regarded as a demerit good when consumed at excessive noise levels.

Table 1 — Weekly late-night venue visits

Weekly late-night venue visits before and after the night-time levy.

Text B — Local policies

1. The city introduced a levy charged to venues for each late-night customer visit. It also introduced maximum noise levels and an awareness campaign. It uses levy revenue to finance soundproofing grants for homes and venues. Table 1 compares visits before and after the levy, while Table 2 compares complaints before and after the full policy package. Treat these as descriptive before-and-after comparisons; they do not by themselves identify the causal effect of any one policy.

2. Officials want to maximize social surplus without eliminating the economic and cultural benefits of the entertainment district.

Table 2 — Monthly verified noise complaints

Monthly verified noise complaints before and after the policy package.

Textile wastewater in Nembia

Textile dyeing is an important source of employment and export revenue in Nembia. However, untreated wastewater from textile factories damages downstream fisheries and increases water-treatment costs. Factories do not compensate affected households.

Table 1 provides linear marginal benefit and cost equations for Nembia's textile market. Quantity is measured in millions of metres of fabric per year and price, benefit and cost are measured in dollars per metre.

Table 1: Linear marginal benefit and cost equations for Nembia’s textile market.

The government is considering a Pigouvian tax on textile production. It can monitor factory output, but estimates of ecological damage are uncertain and smaller firms may find pollution-control equipment difficult to finance.

Adult vaccination in Calidora

A contagious respiratory disease causes worker absences and places pressure on public hospitals in Calidora. Vaccinated adults receive private protection, while other people benefit from reduced transmission. Vaccinations are currently purchased from private clinics.

Table 1 provides marginal benefit and cost equations for annual vaccinations. Quantity is measured in thousands of vaccinations and monetary values are measured in dollars per vaccination.

Marginal benefit and cost equations for annual adult vaccinations in Calidora.

The government is considering a producer subsidy, public provision through community clinics, and an information campaign. Rural access is limited, and some unvaccinated adults report that they are concerned about vaccine safety.

Groundwater extraction in San Aurelio

Farmers in San Aurelio extract water from a shared underground aquifer. Individual wells are located on private farms, but excluding farmers from the connected aquifer is costly. Excessive withdrawal lowers the water table, increases pumping costs for other farmers and reduces future water availability.

Table 1 provides marginal benefit and cost equations for groundwater extraction. Quantity is measured in millions of cubic metres per year and monetary values are measured in cents per cubic metre; for conversions, 100 cents equal 1 currency unit.

Groundwater-extraction marginal benefit and cost equations.

Hydrologists estimate that the aquifer naturally recharges by 30 million cubic metres per year. A local water-user association proposes metered extraction rights, joint monitoring and penalties for members who exceed agreed allocations.

High-noise recreational vehicles in Belvar

High-noise recreational vehicles are used on roads near residential and wildlife areas in Belvar. Buyers value the vehicles' performance, but their use causes sleep disturbance, stress and habitat disruption for third parties. Production itself creates no externality.

Table 1 provides marginal benefit and cost equations for the annual market. Quantity is measured in thousands of vehicles and monetary values are measured in hundreds of dollars per vehicle.

Marginal benefit and cost equations for high-noise recreational vehicles.

After a small pilot information campaign in one region, annual sales there fell from 30 000 to 26 000 vehicles.

Peatland fires in Oranta

Read the extracts and answer the questions that follow.

Text A — Smoke across borders

1. Peatlands in Oranta are drained and burned to clear land for agriculture. Smoke causes illness domestically and in neighbouring countries, while greenhouse gases contribute to global climate change.

2. Producers do not bear all these costs. Burning therefore creates a negative externality of production, and national action alone may be insufficient.

Table 1 — Annual area of peatland burned

Annual area of peatland burned in Oranta.

Text B — Regional cooperation

1. Oranta joined an international agreement requiring fire monitoring, restoration and penalties for illegal burning. Wealthier members provide satellite technology and conservation finance.

2. Enforcement remains difficult because fires occur in remote areas and countries disagree about responsibility and costs.

Table 2 — Verified fire incidents

Reported and independently verified peatland fire incidents in Oranta, latest year.

Communal grazing in Darsana

Read the extracts and answer the questions that follow.

Text A — Pressure on grasslands

1. Pastoral households in Darsana graze livestock on shared grasslands. Grazing is rivalrous because forage eaten by one herd is unavailable to another, but excluding established users is difficult.

2. Herd expansion has caused soil erosion and reduced future forage. The grassland is a common access resource vulnerable to overuse.

Table 1 — Average grass cover

Average grass cover of monitored land in Darsana.

Text B — Local management

1. Grazing associations have introduced rotational access, herd limits and member-funded monitoring. This form of collective self-governance relies on locally agreed rules and penalties.

2. The national government is considering individual grazing permits, but mobile herders fear exclusion from traditional routes.

Table 2 — Livestock using the shared grassland

Livestock using Darsana's shared grassland.

Electronic waste in Terenza

Read the extracts and answer the questions that follow.

Text A — Disposal and recycling

1. Households in Terenza replace electronic devices frequently. Informal recyclers burn cables and use unsafe chemicals, creating toxic smoke and contaminated water. These costs affect workers and neighbouring communities.

2. Cheap disposal encourages excessive replacement and unsafe processing. In a pilot, a Pigouvian tax was charged to sellers of newly sold devices.

Table 1 — New electronic devices sold annually

Annual sales of new electronic devices before and after an implemented pilot Pigouvian tax charged to sellers.

Text B — International movement of waste

1. Some discarded devices are exported to countries with weaker environmental enforcement. Terenza is negotiating common standards, shipment tracking and producer-financed recycling with its trading partners.

2. Effective policy requires monitoring to verify waste shipments and treatment methods. Producers warn that strict rules could raise device prices and reduce employment.

Table 2 — Tracked electronic-waste shipments

Tracked electronic-waste shipments in the latest year

The Pelagos coastal fishery

The Pelagos coastal fishery is open to all licensed domestic vessels. Fish are rivalrous because a fish caught by one vessel is unavailable to another, but excluding additional vessels has historically been difficult. The fish stock is declining because annual catch exceeds regeneration.

Table 1 gives the marginal benefit and cost equations for the Pelagos coastal fishery.

The fisheries authority proposes a total annual catch cap of 24 000 tonnes and transferable catch permits. Under an initial allocation, Fleet A receives permits for 14 000 tonnes and Fleet B receives permits for 10 000 tonnes. Fleet A then sells permits for 3 000 tonnes to Fleet B at 8 dollars per kilogram of permitted catch.

Cement emissions in Arandia

Cement production in Arandia emits greenhouse gases that contribute to global climate change. Cement producers do not bear the full climate cost of their emissions. Each tonne of cement produced releases 0.8 tonnes of carbon dioxide.

Table 1 provides marginal benefit and cost equations for cement. Quantity is measured in millions of tonnes of cement per year and monetary values are measured in dollars per tonne of cement.

Table 1: Marginal benefit and cost equations for Arandia’s cement market.

Arandia is considering a carbon tax. Several neighbouring countries do not price carbon, and domestic producers argue that a unilateral tax could cause cement production to relocate. Arandia is also negotiating a regional emissions agreement that would require verified emissions reporting.