Exam 14: Environmental Economics

A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?

Negative externalities impose most of their costs:

The optimal level of pollution is:

When consumption of a good or service produces benefits or costs that are not reflected in the market price for the good, this is known as a(n):

Which of the following is the environmental approach found in the Clean Air Act of 1990?

If government taxes a firm which pollutes this will:

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following offers the best and most complete description of this situation?

Incentive-based regulations:

Zero pollution represents an efficiency standard.

Exhibit 14-1 Private and social cost -Use Exhibit 14-1 to answer the following question. To maximize social welfare, the firm should produce at the output rate:

A profit-maximizing firm will base its supply decisions on its marginal:

Ronald Coase's analysis of externalities emphasizes the importance of:

Command-and-control regulation, as compared to incentive-based regulation, is:

Which of the following is the best example of a command-and-control regulation?

Economists view pollution as an economic problem that arises because:

The social marginal cost curve is higher than the private marginal cost curve.

Requiring cars in Los Angeles to reduce pollution by the same amount as cars in Topeka is inefficient.

Markets for pollution rights:

Exhibit 14-3 Impact of flights on house value Each time Orville flies over Wilber's house, the noise reduces the value of Wilbur's house. The table shows the profits to Orville of each flight, and the value of Wilbur's house. Number of flights Total profits Marginal profits Value of Wilbur's house 1 \ 10,000 \ 10,000 \ 100,000 2 18,000 8,000 95,000 3 24,000 6,000 90,000 4 28,000 4,000 85,000 5 30,000 2,000 80,000 -As shown in Exhibit 14-3, at the socially efficient number of flights, what will be the market value of Orville's house?

Suppose a state discovered chemical compounds in their water. The source of these chemicals is the waste discharges of industrial plants in another state. This is an example of a(n):