Bio-Economics

Vakinfo
Lessen en examens
Docent	Miet Maertens
Lesvorm	Hoorcollege
Examenvorm	Schriftelijk; meerkeuzevragen met twee open vragen
Achtergrond
Studiepunten	4
Wanneer?	2e bach, 1e sem
Brossen?	Eerder niet

2023-2024

26 januari

Open vragen

Question 1

Explain in your own wordss the concept of degrowth and how degrowth relates to the Easterlin paradox and the Jevons paradox. (5pts)

Question 2

"China lifts five-year ban on Belgian Pork", Reuters, January 12th 2024.

Belgium and the United States of America (USA) are both exporters of pork. Many Asian countries, including for example China, Japan and South Korea, are large importers of pork in the world. In 2018 countries in the EU and in Asia suffered from a major outbreak of African swine fever (ASF). There was no ASF outbreak in the USA.

Asian countries implented an import ban on Belgian pork after the ASF outbreak in 2018, implying a complete standstill of participation in pork exports for Belgium. After containment of the ASF outbreak, Asian countries one after the other lifted their import ban on Belgian pork in recent years - with China being the last country to have lifted the ban after the visit of Belgian prime minister De Croo to Beijing early January 2024. In addition, to assure sufficient availability of pork, Asian countries lowered their import tariffs on pork during the ASF outbreak (for example from 12% to 8% in China). Today, these import tariffs on pork are back to their normal levels.

2a. Explain using a graphical analysis what the welfare effects are of the ASF outbreak for Belgium by comparing the situation before the ASF outbreak, the situation in 2018 (and subsequent years), and the situation today in Belgium. Be as complete as possible in analyzing the welfare effects. (5pts)

2b. Explain why and how the USA pork market was affected by the situation. Explain using a graphical analysis what the welfare effects are of the ASF outbreak for the USA by comparing the situation before the ASF outbreak, the sitation in 2018 (and subsequent years), and the situation today in the USA. Be as complete as possible in analyzing the welfare effects. (5pts) Meerkeuzevragen (Alles op 1 punt)

Meerkeuzevragen met gis correctie -0,33 pts (Alles op 1 punt + juist antwoord in cursief)

Question 3

Considering a competitive market and profit maximizing firms, which one of the followin statements is correct:

A firm operating in a competitive market and facing a price below its average total cost and above its average variable cost should shut down, its operation in the short run.
A firm operating in a competitive market and facing a price below its average total cost and below its average variable cost should increase its output to minimize losses in the short run.
A firm operating in a competitive market and facing a price above its average total cost but below its marginal cost, and facing decreasing returns to scale, should in crease its otput in the short and decrease its scale of operation in the long run.
A firm operating in a competitive market, facing a price above its average total cost and above its marginal cost, and facing increasing returns to scale, should increase its output in the short run and increase its scale of operation in the long run.

Question 4

Consider two firms in a sector that creating greenhouse gas (GHG) emissions during the production process. The graph depcts the marginal benefit of GHG emissions for firm A (MBA) and firm B (MBB)

Which one of the following statements concerning the policies to reduce GHG emissions hold in this case?

Taxing the firms per unit of GHG emission will result in an efficient outcome with both firms reducing their GHG emission levels to the same extent.
Distributing an equal ampount of tradeable GHG emission permits tot he firms will results in an efficient outcome with firm A likely selling permits to firm B.
Setting and enforcing an environmental standard (i.e. a maximum emission level) will result in an efficient outcome with both firms reducing their GHG emission levels to the same extent.
Taxing the firms per unit of GHG emission will result in an efficient outcome with firm B likely reducing GHG emssion levels more than firm A.

Question 5

Consider a hypothetical economy with only 3 products (A, B and C). The table below gives for each of these products the number of units produced and the price per unit for the years 2021, 2022 and 2023


	Production ( # units)			Price per unit (in € )
	2021	2022	2023	2021	2022	2023
Products A	100	105	115	10	12	15
Product B	150	140	140	5	7.5	6
Product C	200	210	220	10	10	12

What is the annual nonimal and real GDP growth in this hypothetical country?

Nominal GDP growth is 17.6% ad 18% in 2022 and 2023 respectively. Real DP growth is 1.9% and 5.4% in 2022 and 2023 respectively.
Nominal GDP growth is 2.3% and 5.2% in 2022 and 2023 respectively. Real GDP growth is 17.6% and 18% in 2022 and 2023 respectively.
Nominal GDP growth is 17.6% and 18% in 2022 and 2023 respectively. Real GDP growth is 2.3% and 5.2% in 2022 and 2023 respectively.
Nominal GDP growth is 2.6% and 4.9% in 2022 and 2023 respectively. Real GDP growt is 15.3% and 12.5% in 2022 and 2023 respectively.

Question 6

Nigeria and Vietnam located in respectively Western Africa and Southeast Asia, both produce rice and corn. It is expected that climate change will have a major impact on rice and corn yields. In Nigeria, yields are expected to still increase somewhat because of agricultural instensification programs. Current (2023) and expected future (2050) rice and corn yields in these countries are given in the table below.


Rice and corn yields in 2023			Expected rice and corn yields in 2050
2023	Nigeria	Vietnam	2050	Nigeria	Vietnam
Rice	3 ton/ha	6 ton/ha	Rice	4 ton/ha	4 ton/ha
Corn	3 ton/ha	7 ton/ha	Corn	5 ton/ha	6 ton/ha

Considering only these two countries and these two crops, how is the direction of trade expected to change as a result of climate change and agricultural intensification in the comin decades?

Nigeria will become a rice exporter by 2050 while currently it is a rice importer.
The firection of trade will likely not change, and Nigeria will continue to export corn whlie Vietnam will continue to export rice.
Vietnam will become a rice exporter by 2050 while currently it is a rice importer.
The direction of trade will likely not change, and Nigeria will continue to export rice while Vietnam will continue to export corn.

Question 7

Which one of the follwoing statements about the carbon border adjustment mechanism (CBAM) in the EU is a normative economic statement?

Estimate indicate that CBAM will reduce carbon leakage by 29% in the five most important EU industry sectors. Note: carbon leakages are carbon emission shifts due to regualtions, leading to polluting industries moving elsewhere.
CBAM will assure that the carbon price of industrial products produced in the EU equals the carbon price of industrial imports.
CBAM will contribute positively to a more sustainable and fair global economy.
Non-EU countries who do not invest in green technologies for industrial production will likelt be most affected by CBAM.

Question 8

Which one of the following statements concerning inequality in GDP per capita between countries is NOT correct?

A decrease in relative inequality between countries is more difficult to realize than a decrease in absolute inequality between countries
The relative inequality between countries has increased substantially over the course of time from the Industrial Revolution until now.
The advantages of backwardness is a theory that explains why inequality in GDP per capita between countries may decrease.
Relative inequality between countries will decrease when GDP per capita growth rates are larger in poorer countries than in richer countries.

Question 9

Consider person Z who is consuming coffee and cookies. Z's marginal utility of the consumption of a cup of coffee is 10 while 2's marginal utility of the consumption of a cookie is 5. The price of a cup of coffee is 1.5 € and the price of a cookie is 0.5 €. What should Z do to maximize his/her/their utility?

It is impossible to know this with the given information as this depends on the preferences of Z.
Z should reduce the consumtion of cookies and/or increase the consumtion of coffee.
Z should reducte the consumption of both cookies and coffee.
Z should reducte the consumption of coffee and/or increase the consumption of cookies.

Question 10

The market for mabile phones may suffer from a Lemon Market problem because consumers cannot differentiate between low-quality phones (e.g. with a very short batter life) and high-quality phones (e.g. long battery life). We did some research on the quality of mobile phones in the market and on consumers willingness to pay. The conclusion from our research that is publicly available, ins that only 25% of all mobile phones for sale are of high quality and that consumers are willing to pay 500 € for high quality phones but only 300 € for low-quality phones. When is Lemon Market problem likely to occur in this market for mobile phones?

A Lemon Market problem is likely to occur when suppliers of high-quality phones are not willing to sell for a price of 350 € or below.
A Lemon Market problem is likely to occur when suppliers of low-quality phones are not willing ot sell for a price of 350 € or below.
A Lemon Market problem is likely to occur anyhow, no matter what prices suppliers charge.
A Lemon Market problem is llikely to occur when suppliers of low-quality phones are not willing to sell for a price of 300 € or below.

Question 11

The telecommunication sector has oligopoly characteristics with a few companies dominating the sector and repeatedlt dealing with each other in the market. This creates scope for tacit collusion, although this is forbidden under anti-trust laws. Imagine there are only two companies in the sector. Romxipus and Entelet. They both offer a monthly mobile phone and internet package with 5 GB of data on which they make the lion's share of their profits. Below you find the pay off matrix for the companies, in which their yearly profits depend on the price they charge for the monthly package of 5 GB.


		Entelet (E)
		Price 55 €	Price 30 €
Romxipus (R)	Price 55 €	Profit R = 6,5 million € Profit E = 9 million €	Profit R = Y
Romxipus (R)	Price 30 €	Profit R = 8 million € Profit E = X	Profit R = 5 million € Profit E = 7 million €

Irrespective of anti-trust laws, how high should X and Y minimally be for tacit collusion between these companies to be feasible?

Tacit collusion between these companies is never feasible even if X and Y are very high.
Tacit collusion between these companies would always be feasible, even if X and Y are zero.
Tacit collusion between these companies becomes feasivle if X is greater than or equal than 9 million and Y greater than or equal than 6.5 million
Tacit collusion between these companies becomes feasivle if X is greater than or equal than 7 million and Y greater than or equal than 5 million

Question 12

Which one of the following statements on the Tragedy of the Commons is NOT correct?

Tragedy of the commons can lead to severe degradation or even complete extinction of a resource
Tragedy of the commons implies that resources that are non-rival in consumtion and non-excludable tend to be overexploited.
Tragedy of the commons emerges because exploitation of the resource is associated with large private benefits for the users of the resource.
Tragedy of the commons emerges becuase exploitatoin of the resource is associated with large social costs that are not taken into account by users of the resource.

Question 13

Belgian politicians are talking about increasing the value-added tax or consumption tax on ultra-processed food and drinks (UPFD) in order to stimulate more healthy diets. Many UPFD are cheap food options that are speciafically attractive to lower-income consumery. The demand for UPFD in Belgium is more price inelastic among lower-income consumers and more price elastic among higher-income consumers. Yet the income elasticity of demand for UPFD is higher among lower-income consumers than among higher-income consumers.

13a. What will the result of such a tax increase likely be?

A new market equilibrium will occur at a higher price and a lower quantity. Consumers will lose surplus while producers will gain surplus. HIgher-income consumers will decrease cosumtion of UPFD more than lower-income consumers.
A new market equilibrium will occur at a higher price and a lower quantity. Consumers and producers will both lose surplus. Higher-income consumers will decrease consumptioin of UPFD more than lower-income consumers.
A new market equilibrium will occur at a higher price and a lower quantity. Consumers and proucers will both lose surplus. Lower-income consumers will decrease consumtion of UPFD more than higher-income consumers.
A new market equilibrium will occur at a lower price and a higher quantity. Consumers will gain surplus while producers will lose surplus. Lower-income consumers will decrease consumption of UPFD more than higher-income consumers.

13b. Is this tax increase likely to be a proportional, regressive or progressive tax?

There is not enough information about the tax burden to know this.
Progressive
Proportional
Regressive

Question 14

The company CoMoNo produces XOZ (a fake product) and faces a cost structure as indicated in the table below. The demand and supply for XOZ in the market are given by:

Demand: P = 20 - 0.5*Qd

Supply: P = 2 + 0.5*Qs


Output level (Q)	Total Variable Cost	Total Fixed Cost
0	0	2
1	3	2
2	8	2
3	15	2
4	24	2
5	35	2
6	48	2
7	61	2
8	80	2
9	99	2
10	120	2

14a. If CoMoNo is operating in a perfectly competitive market, what is the profit-maximizing output level of the comapny and how much profit will the company make when producing at this point?

Q = 7 and profit = 18
Q = 5 and profit = 18
Q = 2 and profit = 12
Q = 10 and profit = 20

14b. If CoMoNo is a monopolist (who cannot price discriminate), what is the profit-maximizing output level of the company and how much profit will the company make when producing at this point?

Q = 10 and profit = 48
Q = 5 and profit = 45.5
Q = 10 and profit = 20
Q = 7 and profit = 52.5

Question 15

This graph depicts the supply (S) and demand (D) for a hypothetical good X. Demand shifts outwards from D1 to D2.

What could cause this outward shift in the demand?

An increase in the price of a substitute for X when X is a normal good.
An increase in income if X is an inferior good.
The expectation that the price of a complement of X will decrease in the future.
A decrease in income if the demand for X is income inelastic.

2022-2023

27 januari

Open vragen

There have been recent proposals to abolish value-added tax (consumption tax) on fruits and vegetables
1. What could the rationale be to abolish this tax?
2. Explain with a graphical analysis what the consequences of the abolishment of the tax could be. Indicate clearly what happens
3. Price elasticity for demand for apples and pears is -0,8, while for berries it is -1,4. Explain with a graphical analysis what the consequences of the tax abolishment are on these two goods. Are they different?
4. Is a tax on fruit and vegetable consumption a progressive, regressive or proportional tax? What do you think? Explain.
The lemon market problem or the problem of adverse selection. Explain the problem in your own words and propose some ways to counter the phenomenon.

Meerkeuze (weet ik niet allemaal meer maar dit waren de moeilijkste)

The GDP of Ampilota is (..), the aggregate consumption function is given by (..) and planned investment is (..). What do you expect will happen to the Ampilotan economy in the next years?
The demand curve for park space is given by Qu (..) for regular users of park space andQnu for non-regular users. If the marginal cost for the government to create park space is 200.000Q = MC, what is the social optimum level of park space they should provide?
A monopolistic firm faces a constant MC = 4€ and a demand curve of Q = 4000 - 250P. What is the output they will produce at to maximise profits?
If the firm from the question above could perfectly price discriminate, what would their profits be? What would social loss be?ùThe EU and the UK are both members of the WTO. What would the consequences be if they hadn't reached a trade deal with Brexit? (i.e. the WTO trade rules about most favoured-nations and tarrifs would apply)

2021-2022

28 januari 2022

Open vragen

Question 1: The EU is a net importer of meat from bovine animals - or beef (Dutch: rundsvlees). The beef imported by the EU mainly comes from the US, Brazil, Chile and other Latin American countries A) Explain, using a graphical analysis, what the welfare effects are of the trade in beef for the EU and for Brazil (in comparison to no trade in beef). Indicate in your analysis, the distribution of these welfare effects. (6 punten) Answer: + 3 punten: EU: completely correct +0.5 punten: EU: demand, supply & pw correct (below pd) +1 punt: EU: CS increase correct +1 punt: EU: PS decrease correct +0.5 punten: EU efficiency gains -0.5 punten: EU: small mistake -1 punten: EU: large or multiple mistake(s) +3 punten: Brazil: completely correct +0.5 punten: Brazil: demand, supply, pw correct (above pd) +1 punt: Brazil: CS decrease correct +1 punt: Brazil: PS increase correct +0.5 punten: Brazil: efficiency gain correct -0.5 punten: Brazil: small mistake -1 punten: Brazil: large or multiple mistake(s) 0 punten: Geen van bovenstaande

B) Would it make sense for the US and Latin-American countries to make agreements among themselves to reduce the herds of bovine animals, and reduce the production and export of beef in expectations of higher prices and better terms of trade? Why or why not? Motivate your answer. (3 punten) Answer: +3 punten: Complete and correct answer: no because other producing countries, and rather price elastic demand for beef and close substitutes available. +1 punt: No, this does not make a lot of sense as they would not be able to increase the world market price of beef much. +1 punt: There are other producing countries, and these countries would expand production. In addition it is rather easy for countries to entry into beef production. +1 punt: Substitutes for beef exist. Therefore, demand for beef is rather price elastic, such that reduced production (in an agreement) would not increase price much. 0 punten: Geen van bovenstaande

C) The EU imposes a rather high tariff (of 20%) on beef imports. Why would the EU apply such a tariff? (1 punt) Answer: +1 punt: Protect domestic producers in the EU. +0.5 punten: Something else useful (tax revenue, reduce environmental externalities, ..) 0 punten: Geen van bovenstaande

D) Explain, using a graphical analysis, what the welfare effects of this tariff on beef are in the EU (in comparison to a situation of free trade without tariffs). Indicate in your analysis the distribution of these welfare effects. (5 punten) Answer: +5 punten: completely correct +1 punt: tariff correctly indicated, increasing the price above the world market price but below the domestic equilibrium price in the EU; such that imports reduce +1 punt: CS correctly indicated in the graph, CS decreases because of the tariff +1 punt: PS correctly indicated in the graph, PS increases because of the tariff +1 punt: tax revenue correctly indicated in the graph, tax revenue for the government positive +1 punt: deadweight losses correctly indicated in the graph, deadweight losses are negative because the decrease in CS is larger than the sum of the increase in PS and tax revenue. There are net losses to society from the tax. Gains from trade are reduced in comparison to no tariff. -0.5 punten: small mistake / something incomplete -1 punten: large mistake or several small mistakes 0 punten: geen van bovenstaande

Question 2: Explain in your own words what public goods are and what the intrinsic problems are with the provisioning of public goods. (5 punten) Answer: +1 punt: Public goods are non-rival in consumption: one person's consumption of a public good does not decrease the availability of the good for another person. +1 punt: Public goods are non-excludable: nobody can be excluded from the consumption of a public good. +1 punt: Drop-in-the-bucket problem: provisioning of public goods is expensive and a single person's payment for the good does not make a difference (or the provisioning does not depend on a single person's payment) +1 punt: Free-rider problem: people are not willing to pay for public goods because they cannot be excluded if they do not pay (or they can still enjoy the benefits of the good if they do not pay). +1 punt: Difficult to know for policy-makers how much of a public good needs to be provided because people have an incentive to not reveal their true preferences for the good because of the drop-in-the-bucket and free-rider problems. -0.5 punten: Small mistakes / missing things / poor explanation -1 punten: Large mistakes / missing things / poor explanation 0 punten: Geen van bovenstaande

Meerkeuzevragen