Kurtz 1 Lauren Kurtz Prof Doug Lipton Prof Doug Parker TA Dennis Guignet AREC200 0103 4 May 2011 Problem Set 3 1 Revealed preference is defined by observing individual consumer behavior in order to relate it to the quality of the environment Statistical and economic models are used to conjecture theories from the behavior This method relies on inferences On the other hand stated preference determines willingness to pay among consumers based on obtaining or avoiding a situation The benefits of this method include how one can estimate the value of anything and it is the only method to measure existence value It is generally easy to conduct and comprehend 2 Although oysters are very useful for commercial fishing they have several other purposes to positively impact the ecosystem Two examples of ecosystem services that oysters provide are water filtration and nutrient removal Cleaning the water and removing negative nutrients are both beneficial services to our environment and cleanliness of the water 3 Although all fishermen are initially given the same quota of striped bass some choose to buy quota while others choose to sell it Their quotas are based on how beneficial it is for them to be fishing for striped bass If they will gain economic advantage from selling some of their quota they will proceed with this transaction Their quota is set to attain the highest possible sustainable amount of achievement without over fishing If a fisherman cannot personally achieve quota he may sell it to still benefit from it financially If a fisherman is going to exceed quota he may buy it to continue to fish 4 While the nominal value of the Chesapeake fishing harvest has increased the real value of the fishing harvest has decreased These values are different because a real value is Kurtz 2 affected by inflation factors but a nominal value is the fixed value that does not fluctuate The explanation for this difference is a result of the arranged value increasing due to a high demand for the different fish population harvests and the interest value decreasing due to the higher costs 5 A Pareto improvement occurs when an action benefits at least one party and does not negatively affect anyone else On the other hand the Kaldor Hicks Compensation occurs when a prospective gainer can compensate any prospective losers with this method if there is the possibility that no party is negatively affected the gainer should choose that option Both of these theories result in a positive exchange however they go about permeating success in different ways 6 When the population of striped bass was at an all time low it was necessary to institute a measure of management As a result a moratorium was established The striped bass moratorium was the management action that led to a recovery of the striped bass population 7 The concept of exclusivity declares that all benefits and costs that result from owning and using a resource should accrue to the owner and only the owner A violation of this property right in retrospect to the Chesapeake Bay is when fishing licenses are taken advantage of If a license is supposed to solely benefit the owner the owner s companions or acquaintances should not be involved in using the license for the act of fishing with it 8 The water quality of the Chesapeake Bay is inadequate and unacceptable therefore the amount of available healthy water is decreasing or being developed upon In recent years the value of agricultural production has increased because we know that there is a great need for agricultural expansion Production has expanded in the areas that are exceptionally cleaner assignment I pledge on my honor that I have not given or received any unauthorized assistance on this