Natural resources and environmental economics UE Past Papers Questions.

Explain Pareto-optimal allocation of two goods between two households using economic theory and the Edgeworth box. Assume an initial endowment level for the two goods which is Pareto-improving.

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The following figure illustrates the point of optimum use of stock resources in line with the Hotelling rule of exploitation of resources. Using your understanding of the rule prove that distance LE in the figure is equal to sistance Q*K.

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Common property regimes have a built in structure of economic and non-economic incentives that encourage lack of compliance with existing conventions and institutions.

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Assuming two consumers and two goods, the Pareto criterion suggests that an allocation of resources which can be improved upon occurs only when the indifference curves of the two consumers are tangent to each other.

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The Pareto criterion avoids a paternalistic attitude. It considers individuals as the best judges to their own well-beings. It also avoids intrapersonal comparison of well-being.

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