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MSU ISB 201 - Full Cost Pricing

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ISB 201 1st Edition Lecture 3Outline of Last Lecture I. Review: Historical Tragedy of the CommonsII. Quiz 1III. HW: Easter IslandIV. Key TermsV. Economic Value of InsectsVI. Benefits of Composting VII. River and Ecosystem Services Outline of Current Lecture VIII. Capitalist Market Economies IX.SubsidyX.Environmental EconomicsXI.Goals for full cost pricingXII.Environmental IssuesCurrent LectureVIII. Capitalist Market Economies A. Drive out competition like monopoliesB. Global free tradeC. Maximize profitsD. Lobby for government SUBSIDIES IX. SubsidyA. Defined: a sum of money granted by the government or a public body to assist an industry/business so that the price of a commodity or service may remain low or competitive.1. Subsidies that help the environment: NGR energy (solar panel company) and Telsa Motors (electric cars)2. Subsidies that harm the environment: Fisheries (promote overfishing) and Fossil fuel industries (harmful carbon emissions) B. Subsidies not distributed equally, many times goes to the bigger businesses as an incentive to be more productiveX. Environmental EconomicsA. Defined: studies the economic impact on the environment and environmental policiesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.B. Companies once considered successful are facing criticism C. Potential economic solution to improve environment1. Full Cost Pricing (Green Tax): the game plan to reduce environmental impacta. Internal costs: factors which drive market price ex: labor, energy, productionb. External costs: harmful effects passed on ex: environment, public healthXI. Goals for full cost pricingA. Generate funds to offset external costsB. Increase consumer awarenessC. Increase environmental awarenessD. Decrease consumption1. Example: Tax on Sodaa. Problem: healthier foods are more expensive and junk food is getting cheaper. Corn starch found in soda is decreasing in price due to farming subsidy for cornb. Solution: 1 cent per oz tax in New Yorkthat money goes towards the costs of obesity XII. Environmental Issues A. Bananas in Costa Rica1. Internal costs (these are generally the same for all products): labor, distribution, transportation, machinery 2. External costs: fertilizer and pesticide contamination, deforestation, destruction of habitat B. Chopsticks in China1. Internal costs: same above2. External costs: deforestation that causes loss of wind barrier, dust storms, and pollutionC. Cotton T-shirt1. Internal costs: same above2. External costs: air pollution, fertilizer and insecticide contamination, sweat shops, overuse of


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