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Illustrating Environmental Issues by
Using the Production-Possibility Frontier:
A Classroom Experiment
Nancy Carson
a
& Panagiotis Tsigaris
a
a
Department of Economics , Thompson Rivers University , Canada
Published online: 18 Jul 2011.
To cite this article: Nancy Carson & Panagiotis Tsigaris (2011) Illustrating Environmental Issues
by Using the Production-Possibility Frontier: A Classroom Experiment, The Journal of Economic
Education, 42:3, 243-254, DOI: 10.1080/00220485.2011.581940
To link to this article: http://dx.doi.org/10.1080/00220485.2011.581940
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THE JOURNAL OF ECONOMIC EDUCATION, 42(3), 243254, 2011
Copyright
C
Taylor & Francis Group, LLC
ISSN: 0022-0485 print/2152-4068 online
DOI: 10.1080/00220485.2011.581940
ECONOMIC INSTRUCTION
Illustrating Environmental Issues by Using the
Production-Possibility Frontier: A Classroom Experiment
Nancy Carson and Panagiotis Tsigaris
The authors develop a new classroom experimental game to illustrate environmental issues by using
the production-possibility frontier in an introductory economics course. Waste evolves as a byproduct
of the production of widgets. Environmental cleanup is produced by reallocating scarce resources
away from the production of the dirty good. In addition to the description of the game and classroom
discussion, the authors illustrate how the students experience with the game can be used as the basis
for exercises on production decisions and environmental regulation.
Keywords classroom experimental game, environmental externality, polluting good, production-
possibility frontier, trade-offs
JEL codes A22, D21, D62
The production-possibility frontier (PPF) is often the rst model an undergraduate student is
exposed to in an introductory economics class. The PPF model, a two-dimensional graphical
pedagogical device, is used to illustrate the concepts of scarcity, choices, and trade-offs; the idea
of an increasing opportunity cost of expanding one sector over another; and the concepts of
unemployed resources, technological progress, and economic growth.
1
The rst classroom experimental game to illustrate the PPF model was published by Neral and
Ray (1995). They devised a classroom game where students produced whajamas and widgets.
2
A whajama is produced by folding a sheet of paper three times, while a widget is produced
The authors thank the referees and associate editor for their valuable and constructive comments and Robert An-
drokovich, Murray Young, and Dian Henderson for their comments and suggestions. In addition, the authors acknowledge
the participants at the Teaching Practices Colloquium of TRU in 2008 as well as the participants at the BC Economics
Articulation Meetings in 2009. An earlier version of this article was presented at the Interdisciplinary Arts and Science
Conference in Gottenhiem, Germany, in November 2009. Last, the authors thank all of their students for being part of
this experiment on sustainability.
Nancy Carson is a lecturer in the Department of Economics at Thompson Rivers University, Canada (e-mail: ncarson@
tru.ca). Panagiotis Tsigaris is an associate professor and chair of the Department of Economics at Thompson Rivers
University, Canada (e-mail: ptsigaris@tru.ca).
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244 CARSON AND TSIGARIS
by doing three different tasks to a sheet of paper. A sheet of paper is cut in half, then folded
twice, and nally stapled to produce a widget. Capital and labor are the available resources.
Resources are allocated to the two sectors in various combinations. Students observe and record
production when all resources are allocated to the production of each good and at least two more
combinations in between the extreme cases. Discussion of results follows the experiment.
The classroom experiment reported in this article builds on the Neral and Ray (1995) game in
order to illustrate the trade-off between the production of dirty widgets and that of environmental
cleanup. Waste evolves as a byproduct of the production of the dirty widget. Environmental
cleanup is produced by reallocating scarce resources away from the production of the dirty good.
Environmental cleanup represents an improvement in environmental quality. Thus, society faces
a trade-off between production of environmental quality and production of dirty goods.
3
We have chosen environmental quality as one of the goods considered in the PPF model
because the topic of environmental sustainability is at the forefront of public attention, and many
students have an interest in environmental issues.
According to Stern (2007), climate change caused by anthropogenic forces burning fossil
fuels is considered the biggest market failure the world has ever seen, and yet students may
not be exposed to the topic of negative externalities or environmental issues in an introductory
course. By running this experiment, students will be exposed to environmental issues and market
imperfections early in their introductory course. As a result, students attitudes toward economics
should change in a positive manner.
The next section describes the classroom experimental game. The section subsequent to
it presents a sample result from a trial during the winter 2009 semester in an introductory
microeconomics class. This is followed by two sections that provide, in order, information on
classroom discussion; and future lecture examples, homework, or exam questions on the topic of
environmental regulations based on the results from the experiment. Finally, concluding remarks
are given. A student handout is available in the appendix.
THE DESIGN OF THE CLASSROOM EXPERIMENT
Learners participate in a production possibility exercise with a xed amount of land, capital,
and labor. These resources are allocated toward the production of two goodswidgets and
environmental cleanup. A widget is produced by folding a small piece of paper twice and
punching a hole in the middle of the folded paper. Widgets break if they fall onto the oor.
Environmental waste evolves as a byproduct of the production of widgets. Pieces of confetti from
the hole-punch device fall onto the oor when production of widgets takes place. There is no
penalty for waste disposal. Environmental cleanup is produced by allocating scarce resources to
pick up the confetti that is scattered all over the oor. Various production possibilities between
widget production and environmental cleanup are observed as resources are reallocated between
the two products.
Capital and labor are used to produce the widget. Capital inputs include a work space, one
handheld hole-punch device, and a stack of 2- 4-inch sheets of paper. A relatively small
section of a desk in front of the classroom is selected as a work space. One hole-punch device
is sufcient to yield diminishing returns as production bottlenecks are bound to appear as labor
usage increases. For this experiment, the confetti catcher, an abatement technology, has been
removed from the hole-punch device. Labor is provided by four or possibly ve students who
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ILLUSTRATING ENVIRONMENTAL ISSUES 245
are selected either randomly or on a volunteer basis. The capital resources are used only in the
production of widgets. Labor is productive in both sectors.
The game proceeds in two phases. Phase 1 involves the production of widgets. Phase 2 involves
environmental cleanup. Production of widgets involves a number of production periods. Each
production period consists of one minute. The rst production period starts with one unit of labor
combined with the xed space, hole-punch device, and stack of paper. Labor is increased by
one unit in each of the following production periods. After each production period, each student
records the level of labor used and the production of widgets. Usually, diminishing returns enter
after the second or third worker.
Once all factors of production are allocated toward the production of widgets, we begin phase
2 of the experiment, involving the environmental cleanup. To save time, all four or ve workers
simultaneously pick up as much confetti as possible within the one-minute production period.
Workers are given an abatement technology to clean up waste. In order to make the cleanup a
relatively difcult task, each worker is allowed to pick up confetti one piece at a time and to use
only his or her two hands. Usually he or she uses one hand as a storage space and picks up confetti
with the other hand. We also have tried an abatement technology where students are allowed to
use one hand for pick-up and the other for holding the confetti, but we did not stipulate how
many they could pick up at once. This can be considered an improvement in the technology of
the cleanup sector since more confetti can be picked up for a given production of widgets. When
the one minute is over, each worker measures his or her productivity (in terms of the amount of
confetti picked up) and reports it to the classroom.
In the environmental cleanup sector, there is no division of labor as all workers do the same job.
If all workers are equally skilled at confetti cleanup, and the confetti is abundant and uniformly
dispersed, then one might expect constant marginal productivity in this sector given there is no
xed capital. However, labor is likely to be heterogeneous (e.g., different-sized ngernails), and a
nonuniform disbursement of confetti can affect productivity. Thus workers in the environmental
cleanup will have differing productivity. As a result, after the one-minute production period a class
discussion takes place in order to determine who should be employed rst in the environmental
sector, then who second, and so on until the last worker. The production-possibility frontier
assumes efciency, which requires that the person who is most skilled at cleanup be allocated to
that sector rst.
Workers in the environmental cleanup sector are then ranked from the highest productivity
to the lowest productivity. Next, the total product curve is constructed by adding the marginal
contribution of each worker fromthe highest productivity to the lowest productivity. This approach
guarantees that in the environmental sector, diminishing returns appear from the beginning of the
process. The class is asked to record the total product curve on a table with the total quantity of
confetti that could be picked up with various numbers of workers within the one minute.
The next step for the whole class is to compile, record, and plot the data on widgets and the
environmental cleanup production to illustrate the production-possibility frontier. We provide
students with a table and ask them to record the production of widgets from the most workers to
the smallest number of workers, and in reverse order of labor usage for the production of cleanup.
The data generated fromthe exercise traces out a negatively sloped concave production-possibility
frontier. Finally, the students are asked to compute the opportunity cost of an additional unit of
environmental cleanup. They quickly realize that the opportunity cost of cleanup increases as
more cleanup is undertaken, and they see rsthand that the opportunity cost is the loss in widget
production.
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246 CARSON AND TSIGARIS
SAMPLE RESULTS
We have run this game successfully a number of times since the fall of 2008. Below we illustrate
the results from a game played during the winter of 2009 in an introductory microeconomics
classroom with approximately 40 students in attendance. After the illustration, we discuss the
robustness of the game.
In terms of production of widgets, the rst worker produced nine widgets in one minute. Then
two workers together produced 21 widgets in one minute. The workers decided to divide work with
one punching the holes and the other folding the paper. Increasing returns were observed and can
be attributed to the division of work and specialization of labor. Marginal productivity increased.
Diminishing returns appeared when the third worker entered into the production process. Adding
the third worker resulted in 23 widgets being produced. The three workers divided the task so
that two of them folded and one operated the hole-punch device. The class observed that there
was a bottleneck at the hole-punch device. At the end of the production time, many of the folded
papers had not been hole-punched. Adding the fourth and nal worker resulted in production of
24 widgets. Figure 1 illustrates the production relationship between the total product of widgets
and quantity of labor.
In the next stage of the experiment, all workers were shifted to the environmental sector to
clean up waste. The most productive worker picked up 50 pieces of confetti in one minute, the
second most productive worker picked up 35 pieces of confetti, the third most productive worker
picked up 25 pieces of confetti, while the least productive worker picked up 10 pieces of confetti.
The confetti was taken to a landll for count and disposal at the end of the one-minute period.
Once this process was complete, students built the production function in the environmental sector
by adding the marginal productivity of each worker to get the total production. The production
possibilities follow and are summarized in table 1 and gure 2.
Computing the opportunity cost of picking up one piece of confetti from the oor in terms of
giving up widgets is the nal task assigned. The instructor shows how to compute the opportunity
cost of picking up the rst unit of confetti. Students ll in the rest of table 2.
FIGURE 1 Production of widgets.
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ILLUSTRATING ENVIRONMENTAL ISSUES 247
TABLE 1
The Production-Possibility Frontier
Widget sector Environmental sector
Capital Labor Widgets Capital Labor Cleanup
1 4 24 0 0 0
1 3 23 0 1 50
1 2 21 0 2 85
1 1 9 0 3 110
1 0 0 0 4 120
Note: Capital has no use in the alternative sector.
The game is robust. We played the game for the rst time as a trial in a Teaching Practices
Colloquium at Thompson Rivers University in February 2008. Since then we have played the
game in a number of introductory microeconomics classes. It was played during the fall 2008
(two sections), winter 2009 (two sections), fall 2009 (two sections), and winter 2010 semesters
(one section). During the 200910 academic year, the game was played with two groups at the
same time in each of the courses. This makes the environment competitive and the two groups
compete in order to produce the most widgets. This also allows students to see variations in the
production.
4
The results vary, in terms of numbers, but are always similar in terms of illustrating the
concepts. In the widget sector diminishing returns enter eventually, while in the environmental
sector diminishing returns always occur from the start of the production process due to the
mechanism we use to employ workers. For all of the trials, we have obtained a strictly concave
production-possibility frontier. We experimented with a new abatement technology during the
fall 2009 and winter 2010 semesters. The new abatement technology allows workers to pick up
more than one piece of confetti at a time with one hand. This technological advancement results
in an outward shift in the PPF, as illustrated in table 3. To ensure that there was enough confetti
FIGURE 2 Production-possibility frontier.
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248 CARSON AND TSIGARIS
TABLE 2
Opportunity Cost of Cleanup
Environmental sector
Widgets Cleanup Opportunity cost of cleanup (widgets)
24 0
23 50 0.02
21 85 0.06
9 110 0.48
0 120 0.90
for phase 2 of the experiment, we had students producing a more polluting widget. In phase 1,
the students punch two holes in the folded paper widget. Here too, diminishing returns appear in
the widget sector after two or three workers. If there appears to be too little confetti on the oor,
one could add a stock of pollution by throwing additional confetti on the oor. The additional
confetti could be explained as transboarder or naturally occurring background pollution.
5
CLASSROOM DISCUSSION
Classroomdiscussion can illustrate a number of issues associated with the production of polluting
goods and the environmental impacts. Immediately after the game is played, some of the following
questions can be discussed with students. Instructors may want to refer back to the results of the
experiment later in the course and discuss or assign some of the following questions as homework.
1. What surprised you the most about the production of widgets?
2. Is the rm polluting the environment? Why is the rm not paying for use of oor space
to emit its waste arising from the production of widgets?
3. Is oor space a private property or a common resource property? Would it make a
difference if oor space was private property?
4. What happens to the opportunity cost of cleanup as more resources are shifted to this
sector from the dirty good? Why does this happen?
5. What would happen to the production-possibility frontier if workers were allowed to
sweep up more than one piece of confetti at a time? What would happen to pollution if a
confetti catcher was invented?
TABLE 3
New Production-Possibility Frontier
Widget sector Environmental sector
Capital Labor Widgets Capital Labor Cleanup
1 4 30 0 0 0
1 3 25 0 1 152
1 2 19 0 2 270
1 1 9 0 3 323
1 0 0 0 4 356
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ILLUSTRATING ENVIRONMENTAL ISSUES 249
6. Where on the production-possibility frontier would a market economy operate if there
were no regulation? Is this the socially optimum level?
7. Is the waste accumulative or nonaccumulative? Can anyone give some real life examples
of accumulative or nonaccumulative types of pollutants?
8. What environmental regulations would you recommend to reduce the rms waste?
From our experience, it is good to start the discussion once all factors of production are
allocated toward the production of the dirty widget. We approach the discussion by ask-
ing the class to record their observations on a one-minute comment paper (via a small in-
dex card). The students are asked what surprised them the most from the production of dirty
widgets.
6
Once the instructor has collected the index cards, he or she reads some of the comments, and
the discussion proceeds. Our experience with rst-year undergraduates indicates that they tend
to be surprised to observe the law of diminishing returns. They quickly identify the cause to be
the limited amount of capital as a bottleneck occurs at the hole-punch device. They also observe
division of work and specialization of labor, which can be a cause of increasing returns initially as
many textbooks illustrate. Students are also asked what would happen to the diminishing returns
if capital is increased.
Although students observe the mess from the confetti, they tend to ignore the problem. Their
focus is on the production of widgets. After some comments are read, we add the observation
that production has led to a waste byproduct and introduce the concept of a negative externality.
The rm is polluting and not paying for the damages it is causing. The confetti on the oor is an
external cost that has not been taken into account. The rm did not pay for the disposal of waste,
which adversely affects others. Students come to realize that too much pollution results when the
cost to the environment is external to the rm. For courses with more focus on environmental
issues, the oor space could be described as a common property like the ocean, the atmosphere,
and so on. The oor space has the property of nonexcludability. No person or rmcan be excluded
fromusage, regardless of whether it pays for its use or not. If the oor space were private property,
then the owner of the property could exclude people who do not pay for using it to dispose their
waste. When resources are owned in common, they tend to be overconsumed. Some examples
include the tendency of people to oversh, the overgrazing of pastures that are owned in common,
and the excess emission of CO
2
in the atmosphere.
After phase 2 of the experiment is complete, and the results have been compiled, students
see that the opportunity cost of cleanup increases as production switches from widgets to en-
vironmental cleanup. They realize that the rst worker shifted does not reduce the quantity of
widgets produced by a large amount as diminishing returns are present in that sector, while at
the same time the same worker is very productive in the environmental sector. But as more
resources are shifted toward environmental cleanup, more-productive workers are being removed
from the widget sector, reducing widget production by larger amounts. At the same time, the
marginal contribution in the environmental cleanup sector is falling due to diminishing returns
in the expanding environmental sector. This discussion aids in understanding that the increasing
opportunity cost of cleanup is associated with a concave shape of the PPF curve.
The role of new technologies is an important component for discussion. As stated in the
previous section, we have experimented with picking up more than one piece of confetti at a time.
This new abatement technology increases the production of environmental quality for any given
amount of widget production, thus shifting the PPF. Furthermore, discussing the confetti catcher,
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250 CARSON AND TSIGARIS
a capture and storage technology, can illustrate to students the elimination of current pollution
per unit of time. However, the stock of pollution from previous production remains on the oor.
In a competitive market system involving the production of dirty widgets and waste, if the
negative externality is not internalized, then no clean up takes place. As cleanup is not priced
or rewarded (or as pollution is not priced), competitive markets would lead to zero cleanup, and
thus all resources would be allocated toward the production of dirty goods. Given that cleanup
is valued, too much of the dirty good is produced, and too much pollution or too little cleanup
takes place. Hence a misallocation of scarce resources occurs. The instructor can discuss why the
competitive market allocation of resources is not optimal. The optimal allocation likely occurs
somewhere in the middle of the PPF, where both goods are produced.
The characteristics of pollution and its relation to real world examples offer another interesting
discussion. The instructor can ask if the waste that evolves is (a) accumulative waste, such as
radioactive waste, plastics, and CO
2
concentration in the atmosphere, or (b) nonaccumulative
waste that dissipates soon after it is emitted, such as noise or smog given a particular weather
pattern. This discussion allows one to distinguish between emissions per unit of time and the
ambient concentration of emissions as a stock. Learners realize that waste will remain on the oor
even if future production is free of emissions. The instructor can relate this accumulative type of
waste to global warming where the complete elimination of CO
2
emissions today will not return
the concentrations of CO
2
to their preindustrial-period level at any time soon. The instructor can
discuss the fact that the impact on the climate, due to the higher concentration, is not reversible,
and thus the focus of world policy is to mitigate the effects and adapt to change. Many get excited
and involved in this discussion.
7
Finally, a discussion of environmental regulation could take place. In the next section, we
illustrate how the results of the experiment could be used to illustrate the effects of an emissions
standard or an emissions tax.
USING THE RESULTS TO ASSIGN HOMEWORK ON REGULATION
The students experience with the experiment can be used as the basis of examples and exercises
on production decisions and environmental policy. These examples and exercises can be given
to students at a future date, allowing the instructor to appropriately set the price of widgets
and the prices of capital and labor, as well as the external cost of confetti based on the results
of the experiment. The rst example is designed to illustrate the command-and-control type of
regulation, while the second example allows the students to examine the impact of a tax on
emissions. These examples help students understand the impact of environmental regulations on
the rms production, employment, prot level, and waste emitted.
Command and Control Regulation of Emissions
This exercise is used to illustrate the cost of compliance with an environmental standard. Students
are given table 4 with the rst two columns completed by the instructor, per the results from the
experiment. The students are asked to compute and record waste (e.g., 4 N widgets), revenue,
labor and capital costs, and prots for various levels of labor usage without any regulation initially.
Students compute and ll in table 4s columns 37.
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ILLUSTRATING ENVIRONMENTAL ISSUES 251
TABLE 4
Prots With No Regulation
Labor usage Quantity of widgets Waste Revenue Labor costs Capital costs Prot
0 0 0 0 0 4 4
1 9 36 18 1 4 13
2 21 84 42 2 4 36
3 23 92 46 3 4 39
4 24 96 48 4 4 40
The instructor will provide information on the prices of the dirty widget, labor, and capital
requirements. For example, the price of the widget can be set at $2, the price of labor can be set
at $1 per worker per minute, and the price of capital requirements can be xed at $4. This table
can be done in an Excel spreadsheet, where a sensitivity analysis is easily performed.
Once students have completed the table, they can determine howmany workers the rmshould
hire and what quantity of widgets the rm should produce to maximize prots. This would set the
stage for a discussion of the optimal use of factors of production. In the aforementioned example,
they would come to the conclusion that they should hire four workers, produce 24 widgets per
minute, and emit 96 pieces of confetti per minute of production, with short-run prots equal to
$40.
8
Next, environmental regulation is introduced. Firms are required to reduce waste by various
percentages. The instructor sets the reduction levels (column 1 of table 5) and asks students
to complete the rest of table 5 (columns 25). For this example, the instructor can provide
the following reduction targets0 percent, 4.16 percent, 12.5 percent, 62.5 percent, and 100
percentas these would be appropriate to match the corresponding production levels associated
with the experiment. Students are asked to compute the maximum quantity of waste that is
permitted (column 2 of table 5), the production level of dirty widgets that meets this regulation,
the quantity of labor needed, and the reduction in prots due to the regulation (column 5 of
table 5).
9
Table 5 illustrates abatement costs (measured in lost prots) relative to no regulation
for the sample results in the third section of this article.
TABLE 5
Cost of Command and Control Regulation
% reduction Maximum Production Reduction in
in waste allowed waste to meet Labor prots due
required minute regulation needed to regulation
0 96 24 4 0
4.167 92 23 3 40 39 = 1
12.5 84 21 2 40 36 = 4
62.5 36 9 1 40 13 = 27
100 0 0 0 40 0 = 40
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252 CARSON AND TSIGARIS
TABLE 6
Prots With Emission Taxes
Labor usage Quantity of widgets Waste Prots before taxes Emission taxes Net prots
0 0 0 4 0 4
1 9 36 13 14.4 1.4
2 21 84 36 33.6 2.4
3 23 92 39 36.8 2.2
4 24 96 40 38.4 1.6
The class also can discuss ways of meeting the emissions standard, such as simply reducing
output using the existing technology as the above exercise illustrates, or adopting a new tech-
nology. The learning objective is to have students realize that environmental regulation is costly
when the approach is to reduce production.
10
Environmental Regulation of Emissions: Taxing Emissions
Another exercise or assignment is to use the results of the experiment to examine the impact
of a tax on emissions. Students are given table 6 with the rst two columns completed by the
instructor. Students are informed by the instructor that environmental regulation will require that
the rm pays the government $0.40 for each piece of confetti it emits. This emissions tax is
assumed to equal the marginal external cost. Students are also provided with the same prices as
those in the previous example. They are asked to compute prots for various levels of output as
before:
= pF(K, L) wL rK E
in which is the emissions tax, and E is the amount of emissions. Students complete columns 3
6. Column 5 of table 6 represents the total external cost, which is assumed to be equal to the
total emission tax payment for each level of widget production. Column 6 of table 6 shows
the rms prots net of the emissions tax. Once the table is completed, students can determine the
prot-maximizing level of output under this regulation. For this example, students will realize
that the rm will hire only two workers, produce 21 widgets, emit 84 units of confetti, and make
maximum prots equal to $2.40.
11
They can compare this outcome to the no-regulation situation.
The instructor can ask the students to identify the impact of increasing labor. Students should
realize that while increasing labor marginally increases production, it also results in additional
pollution that is costly due to the regulation. Cost of labor has increased relative to the case
without regulation.
12
CONCLUSION
In this article, we have discussed a classroom experimental game to illustrate environmental
issues by using the production-possibility frontier. The game is designed for an introductory
microeconomics or macroeconomics course and illustrates the trade-off between production
of dirty goods and environmental cleanup. The game also is suitable for introductory courses
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ILLUSTRATING ENVIRONMENTAL ISSUES 253
in resource and environmental economics. Students see the game as a fun and effective way
to illustrate the concepts of environmental externality and the production-possibility frontier.
We believe that an early introduction of environmental issues will improve attitudes toward
economics.
13
The use of the experiment will help to change some of the bias holding the idea
that economics is a dry subject that disregards the environment.
NOTES
1. Examples of the goods used for the PPF in introductory textbooks are guns and butter (Samuelson
and Nordhaus 2001), military and civilian goods (Ragan and Lipsey 2008), pizza and cola (Parkin and
Bade 2010), and computers and cars (Mankiw, Kneebone, and McKenzie 2011). To account for the
increasing opportunity costs, the textbooks state that resources are not equally useful in producing all
goods.
2. Despite the increasing numbers of games (see Brauer and Delemeester 2001, and Bergstrom and Miller
2000), they are not used sufciently to be considered as supplemental to the dominant method of
delivery of the economic concepts known as chalk and talk (Becker and Watts 1996; 2001).
3. In the introductory chapter of Environmental Economics, Field and Olewiler (2005) use environmental
quality and a consumption good for their production-possibility frontier.
4. The experiment can easily be extended to involve active participation from the entire class. The class
could be divided into teams of ve students, with one student in charge of time and record keeping.
5. We did not nd it necessary to add confetti. However, after widget production, any confetti that was
left on the production table was blown onto the oor.
6. This feedback mechanismallows all students to participate. Areviewof the effectiveness of one-minute
comment papers can be found in Stead (2005).
7. Further discussion of the characteristics of the type of waste can take place with students if time permits.
For example, waste can be a point-source pollutant similar to a factorys smokestack or a nonpoint
source such as agricultural chemicals running off the land. Waste can be continuous instead of being
an episodic emission (i.e., oil spills). Finally, waste can be viewed as a global, local, or even regional
type.
8. In more-advanced courses, they can nd the optimal labor demanded by setting the marginal product
of labor as equal to the real wage rate (i.e., MP
L
= w/p = 0.5).
9. Students would need to nd the level of prots with the regulation in order to compute column 5 of
table 5.
10. Discussion can expand into the Porter hypothesis (1991), in which case, stringent environmental
regulation might trigger innovation, improved efciency, and competitiveness resulting in cost savings
for the rm. This would be a win-win situation. It would be a win for the environment and a win to
the rm because the cost savings from the improved efciency through innovation can outweigh the
compliance and innovation costs.
11. The instructor can discuss or assign as homework the relative merits of the two environmental regula-
tions.
12. For more advanced courses, emissions are E = 4Q = 4F(K,L), and hence the optimal labor condition
becomes pMP
L
= w + 4MP
L
. Substituting the previous hypothetical prices leads to a new optimal
labor where MP
L
= 2.5.
13. See Durham, McKinnon, and Schulman (2007) for information on students performance as well as
attitudes toward economics and retention of material.
REFERENCES
Becker, W. E., and M. Watts. 1996. Chalk and talk: A national survey on teaching undergraduate economics. American
Economic Review 86:44853.
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254 CARSON AND TSIGARIS
. 2001. Teaching methods in U.S. undergraduate economics courses. Journal of Economic Education 32:26979.
Bergstrom, C. T., and J. H. Miller. 2000. Experiments with economic principles: Microeconomics. 2nd ed. Maidenhead,
England: Irwin McGraw Hill.
Brauer, J., and G. Delemeester. 2001. Games economists play: A survey of non-computerized classroom games for
college economics. Journal of Economic Surveys 15:22136.
Durham, Y., T. McKinnon, and C. Schulman. 2007. Classroom experiments: Not just fun and games. Economic Inquiry
45:16278.
Field, B., and N. Olewiler. 2005. Environmental economics. 2nd Canadian ed. Whitby, Canada: McGraw Hill Ryerson.
Mankiw, N. G., R. D. Kneebone, and K. J. McKenzie. 2011. Principles of microeconomics. 5th Canadian ed. Toronto:
Nelson Education.
Neral, J., and M. Ray. 1995. Teaching tools experiential learning in the undergraduate classroom: Two exercises. Economic
Inquiry 33:17074.
Parkin, M., and R. Bade. 2010. Microeconomics: Canada in the global environment. 7th ed. Toronto: Pearson Addison
Wesley.
Porter, M. 1991. Americas green strategy. Scientic America 264:96. April.
Ragan, T. S. C., and R. G. Lipsey. 2008. Microeconomics. 12th Canadian ed. Toronto: Pearson Addison Wesley.
Samuelson, P., and W. D. Nordhaus. 2001. Economics. 17th ed. Columbus, OH: Irwin McGraw-Hill.
Stead, D. R. 2005. A review of the one minute comment paper. Active Learning in Higher Education 6:11831.
Stern, N. 2007. The economics of climate change: The Stern review. Cambridge: Cambridge University Press.
APPENDIX
STUDENT HANDOUT
In this exercise you will be asked to observe four or ve of your fellow classmates perform pro-
duction activities. Your randomly selected classmates will participate in a production possibility
exercise. A limited amount of resources (land, capital and labor) will be allocated toward the
production of two goods: dirty widgets and environmental clean-up.
A widget is produced by folding a small piece of paper twice and punching a hole in
the middle of the folded paper. Widgets that fall onto the oor during production break.
Environmental waste evolves as a byproduct from the production of widgets. Pieces of
confetti from the hole-punch fall onto the oor when production of widgets takes place.
Environmental cleanup is produced by allocating scarce resources to clean up the confetti
that is scattered all over the oor. You are asked to pick up confetti using, as technology,
your two hands and you can only pick one piece of confetti at a time. The confetti will be
taken to a landll for count and disposal at the end of the time period.
Fixed inputs include a work space, a hole punch, and a stack of the small (e.g., 4

)
pieces of paper. These resources have use only in the production of widgets. However, labor is
productive in both sectors. The oor is available for all to use free of charge. Floor is a common
resource and no one is excludable.
Production of widgets proceeds rst over a number of production periods. Each production
period lasts one minute. In each period, the xed space, hole-punch and stack of paper is combined
with an increasing number of units of labor. In the second phase of the experiment, labor will be
shifted toward the environmental cleanup and you will measure each persons productivity in that
sector. Please keep track of production and labor usage. I will provide you with the necessary
tables. Are you ready to play?
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