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ECON2100 EXAM 2 Questions and Correct
Answers
incremental benefits Ans: the reduction in health, ecological, and
property damages associated with an environmental policy
initiative.
How are marginal benefits different from incremental benefits?
Ans: Marginal benefits were measured at a point, whereas
incremental benefits are measured over a discrete range.
Types of Incremental Benefits Ans: 1- Primary environmental
benefits
2- Secondary environmental benefits
Primary environmental benefits Ans: Damage-reducing effects that
are a direct consequence of implementing environmental policy.
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Examples of Primary environmental benefits Ans: lower incidence
of respiratory problems, more stable ecosystems, more prosperous
fishing industry
Secondary environmental benefits Ans: Indirect gains to society
that may arise from a stimulative effect of primary benefits or
from a demand-induced effect to implement policy
Examples of Secondary environmental benefits Ans: higher worker
productivity due to improved health increased demand for labor
to implement a policy
can the demand of environmental quality be measured? why or
why not? Ans: since environmental quality is a public, non-
marketed good, its demand cannot be identified because of a non-
revelation of preferences
MSB Ans: Society's Demand
What can we measure by inferring society's demand (MSB) for
environmental quality? Ans: Incremental benefits
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How can you measure incremental benefits? Ans: Changes in TSB;
Find baseline TSB before policy and subtracted baseline from new
TSB after policy is implemented
TSB Ans: Total Social Benefit
How do you calculate TSB? Ans: Area under MSB
Total Environmental Value Ans: User Value + Existence Value
User Value Ans: the benefit derived from physical use or access to
an environmental good (direct or indirect)
Direct User Value Ans: the benefit derived from directly
consuming services provided by an environmental good
indirect user value Ans: is the benefit derived from indirect
consumption of an environmental good
Existence Value Ans: the benefit received from the continuance of
an environmental good
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What is Existence Value motivated by? Ans: Vicarious consumption
and Stewardship
Vicarious Consumption Ans: when individuals value a public good
for the benefit it provides to others
Stewardship Ans: sense of obligation to preserve the environment
for future generations and recognition of its intrinsic value
What are two major approaches to measuring benefits Ans:
Physical Linkage Approach and Behavioral Linkage approach
Physical Linkage Approach Ans: Estimates benefits based upon a
technical relationship between environmental resource and user of
resource (Damage Function Method)
Behavioral Linkage Approach Ans: estimates benefits using
observations of behavior in actual markets or survey responses
about hypothetical markets (direct or indirect)
© 2025 All rights reserved
ECON2100 EXAM 2 Questions and Correct
Answers
incremental benefits Ans: the reduction in health, ecological, and
property damages associated with an environmental policy
initiative.
How are marginal benefits different from incremental benefits?
Ans: Marginal benefits were measured at a point, whereas
incremental benefits are measured over a discrete range.
Types of Incremental Benefits Ans: 1- Primary environmental
benefits
2- Secondary environmental benefits
Primary environmental benefits Ans: Damage-reducing effects that
are a direct consequence of implementing environmental policy.
© 2025 All rights reserved
, 2 | Page
Examples of Primary environmental benefits Ans: lower incidence
of respiratory problems, more stable ecosystems, more prosperous
fishing industry
Secondary environmental benefits Ans: Indirect gains to society
that may arise from a stimulative effect of primary benefits or
from a demand-induced effect to implement policy
Examples of Secondary environmental benefits Ans: higher worker
productivity due to improved health increased demand for labor
to implement a policy
can the demand of environmental quality be measured? why or
why not? Ans: since environmental quality is a public, non-
marketed good, its demand cannot be identified because of a non-
revelation of preferences
MSB Ans: Society's Demand
What can we measure by inferring society's demand (MSB) for
environmental quality? Ans: Incremental benefits
© 2025 All rights reserved
, 3 | Page
How can you measure incremental benefits? Ans: Changes in TSB;
Find baseline TSB before policy and subtracted baseline from new
TSB after policy is implemented
TSB Ans: Total Social Benefit
How do you calculate TSB? Ans: Area under MSB
Total Environmental Value Ans: User Value + Existence Value
User Value Ans: the benefit derived from physical use or access to
an environmental good (direct or indirect)
Direct User Value Ans: the benefit derived from directly
consuming services provided by an environmental good
indirect user value Ans: is the benefit derived from indirect
consumption of an environmental good
Existence Value Ans: the benefit received from the continuance of
an environmental good
© 2025 All rights reserved
, 4 | Page
What is Existence Value motivated by? Ans: Vicarious consumption
and Stewardship
Vicarious Consumption Ans: when individuals value a public good
for the benefit it provides to others
Stewardship Ans: sense of obligation to preserve the environment
for future generations and recognition of its intrinsic value
What are two major approaches to measuring benefits Ans:
Physical Linkage Approach and Behavioral Linkage approach
Physical Linkage Approach Ans: Estimates benefits based upon a
technical relationship between environmental resource and user of
resource (Damage Function Method)
Behavioral Linkage Approach Ans: estimates benefits using
observations of behavior in actual markets or survey responses
about hypothetical markets (direct or indirect)
© 2025 All rights reserved
