4.7 Sustainable development questions for IB Economics

Explain why the atmosphere may once have been regarded as a free good and why its use now involves an opportunity cost.

Using real-world examples, evaluate the view that carbon taxes are the most effective way to reduce greenhouse gas emissions.

Define the term common pool resource indicated in bold in the text (Text A, paragraph 1).

Define the term sustainability indicated in bold in the text (Text A, paragraph 3).

Using information from Table 1, calculate the percentage change in the total catch between 2015 and 2025.

Using a production possibilities curve (PPC) diagram, explain how continued overfishing could affect Ombrena's future production possibilities (Text A, paragraph 2).

Using information from the text/data and your knowledge of economics, evaluate the use of village fishing committees to achieve the sustainable use of Lake Sarnu.

Using Table 1, calculate the price elasticity of demand (PED) for hake between 2022 and 2023.

Using your answer to part (a)(i), state whether the total revenue from hake sales increased or decreased between 2022 and 2023.

Outline why the stock of hake in Merran's waters is a common pool resource.

Fisheries scientists estimate that the largest catch that can be taken each year without reducing the stock is 150 000 tonnes. They estimate that at the free market catch of 200 000 tonnes, the marginal social cost of catching hake exceeds the marginal social benefit by MRP 1.20 per kg, because each tonne caught reduces future catches and raises the costs of other fishing firms.

Using an externalities diagram and the information provided, explain why the hake fishery is an example of market failure.

Assuming the socially optimal catch is 150 000 tonnes, calculate the welfare loss resulting from the free market catch.

The government is considering a system of individual transferable quotas (ITQs). A total allowable catch of 150 000 tonnes would be divided into quotas, which would be auctioned to fishing firms and could later be bought and sold. Officials expect an auction price of about MRP 0.80 per kg.

Calculate the revenue the government would receive from auctioning the full total allowable catch.

Distinguish between a non-tradable catch limit for each vessel and individual transferable quotas as methods of managing the hake fishery.

Explain two reasons why fishing communities in Merran's small ports might oppose the auctioning of individual transferable quotas.

Further information on policy options

• Individual transferable quotas would give quota holders a long-term interest in the stock. Larger firms may buy up quota, and small ports could lose their fishing rights.

• A closed season of three months during spawning would protect breeding fish. Boat crews and processing workers would have no income during the closure.

• A tax of MRP 1.20 per kg of hake landed would raise revenue that could fund retraining, but would be difficult to enforce when catches are landed at foreign ports.

• Decommissioning grants would pay owners to scrap trawlers, reducing fleet capacity. They are costly, and the remaining boats may fish harder.

• Under co-management, fishers' associations in each port would set and enforce local rules with scientific advice. This has worked well in some ports, but hake move across a wide area.

• Hake stocks move between Merran's waters and those of two neighbouring countries, which set their own catch limits.

Using the information provided and your knowledge of economics, recommend a policy the government of Merran could introduce to make the hake fishery sustainable.

Using a production possibilities curve (PPC), distinguish between actual growth and growth in production possibilities.

Using real-world examples, discuss the view that economic growth always conflicts with environmental sustainability.

Define the term non-renewable resource indicated in bold in the text (Text A, paragraph 1).

Define the term negative production externality indicated in bold in the text (Text A, paragraph 2).

Using a production possibilities curve (PPC) diagram, explain the trade-off that Arvenna faces between manufactured output and environmental quality (Text A, paragraphs 1 and 2).

Using an externalities diagram, explain why the market for coal-fired electricity in Arvenna leads to a welfare loss (Text A, paragraphs 1 and 2).

Using information from the text/data and your knowledge of economics, evaluate the government's plan to close all coal-fired power stations by 2035 (Text A, paragraph 3).

Calculate the average catch per boat when 40 boats fish the lake.

Calculate the additional catch per additional boat when the number of boats rises from 40 to 50.

Show that, when 40 boats are already fishing the lake, a villager would expect to profit from adding a boat, even though the total catch would rise by less than the cost of operating that boat.

Calculate the total profit from the lake (the value of the total catch minus the total cost of operating the boats) when 30 boats fish the lake and when 50 boats fish the lake.

Using Table 1, identify the number of boats at which the total profit from the lake is maximized.

Using an externalities diagram and the information provided, explain why open access to Lake Varo leads to overfishing.