Question 1

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

Accepted Answer

A)  efficient in the short run and in the long run. 
B)  efficient in the short run, but not in the long run. 
C)  inefficient in the short run, but efficient in the long run. 
D)  inefficient in the short run and long run. 
A)  efficient in the short run and in the long run. 
B)  efficient in the short run, but not in the long run. 
C)  inefficient in the short run, but efficient in the long run. 
D)  inefficient in the short run and long run.

Question 2

The hot spot problem is:

Accepted Answer

A)  the U.S. obtains the majority of its oil supplies from politically unfriendly countries. 
B)  some air pollutants such as sulfur dioxide have a greater effect nearby than further away. 
C)  some air pollutants such as carbon dioxide have an equal effect nearby and further away. 
D)  nuclear plants heat up nearby water, causing a decline in the native fish population. 
A)  the U.S. obtains the majority of its oil supplies from politically unfriendly countries. 
B)  some air pollutants such as sulfur dioxide have a greater effect nearby than further away. 
C)  some air pollutants such as carbon dioxide have an equal effect nearby and further away. 
D)  nuclear plants heat up nearby water, causing a decline in the native fish population.

Question 3

Which of the following is not an obstacle to achieving environmental efficiency through markets?

Accepted Answer

A)  Transactions costs. 
B)  Income effects. 
C)  Free-rider problems. 
D)  Private negotiations. 
A)  Transactions costs. 
B)  Income effects. 
C)  Free-rider problems. 
D)  Private negotiations.

Question 4

Cite an advantage and a disadvantage for command-and-control vs. incentive-based approaches. Then do the same for environmental taxes vs. emissions trading.

Accepted Answer

Command-and-control is simple, since it

Question 5

Explain why companies that choose low-pollution technologies will find it hard to survive in a competitive industry.

Accepted Answer

In order to survive in a competitive ind

Question 6

Which of the following statements is true ?

Accepted Answer

A)  Competitive markets result in the socially efficient price and quantity when externalities exist. 
B)  Command-and-control regulations set an environmental goal and dictate how the goal will be achieved. 
C)  Economists prefer command-and-control regulations to incentive-based pollution programs. 
D)  An effluent tax is a tax imposed on rich people. 
A)  Competitive markets result in the socially efficient price and quantity when externalities exist. 
B)  Command-and-control regulations set an environmental goal and dictate how the goal will be achieved. 
C)  Economists prefer command-and-control regulations to incentive-based pollution programs. 
D)  An effluent tax is a tax imposed on rich people.

Question 7

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

Accepted Answer

A)  Marketable pollution permits. 
B)  Price caps. 
C)  Command-and-control regulation. 
D)  EPA marginal social permits. 
A)  Marketable pollution permits. 
B)  Price caps. 
C)  Command-and-control regulation. 
D)  EPA marginal social permits.

Question 8

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.
 
As shown in Exhibit 14-3, at the socially efficient number of flights, what will be the market value of Orville's house?

Accepted Answer

A)  $100,000. 
B)  $95,000. 
C)  $90,000. 
D)  $85,000. 
A)  $100,000. 
B)  $95,000. 
C)  $90,000. 
D)  $85,000.

Question 9

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):

Accepted Answer

A)  market failure where the market price of the output of these industrial plants exceeds the social cost of producing these goods. 
B)  private cost imposed by the industrial plants of another state. 
C)  externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. 
D)  negative externality that could be corrected with a subsidy to the plants discharging the waste. 
A)  market failure where the market price of the output of these industrial plants exceeds the social cost of producing these goods. 
B)  private cost imposed by the industrial plants of another state. 
C)  externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. 
D)  negative externality that could be corrected with a subsidy to the plants discharging the waste.

Question 10

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

Accepted Answer

A)  Effluent taxes on pollutants. 
B)  Emissions trading. 
C)  Requiring automobiles to have catalytic converters. 
D)  Offset programs. 
A)  Effluent taxes on pollutants. 
B)  Emissions trading. 
C)  Requiring automobiles to have catalytic converters. 
D)  Offset programs.

Question 11

Firms that emit toxins into the air:

Accepted Answer

A)  underproduce because the private cost of production exceeds the social cost. 
B)  overproduce because the social cost of production exceeds the private cost. 
C)  produce the same as nonpolluting firms. 
D)  produce at the socially optimal amount. 
A)  underproduce because the private cost of production exceeds the social cost. 
B)  overproduce because the social cost of production exceeds the private cost. 
C)  produce the same as nonpolluting firms. 
D)  produce at the socially optimal amount.

Question 12

To achieve social efficiency, the size of an effluent tax should be based on:

Accepted Answer

A)  the external cost created by the pollutant. 
B)  people's willingness to pay for a cleaner environment. 
C)  the expense of installing new "green" equipment. 
D)  the number of free riders in the industry. 
A)  the external cost created by the pollutant. 
B)  people's willingness to pay for a cleaner environment. 
C)  the expense of installing new "green" equipment. 
D)  the number of free riders in the industry.

Question 13

To increase society's total welfare (social efficiency), a production process that produces a negative externality should be:

Accepted Answer

A)  taxed. 
B)  provided by the government. 
C)  ignored. 
D)  subsidized. 
A)  taxed. 
B)  provided by the government. 
C)  ignored. 
D)  subsidized.

Question 14

Which of the following provides an example of command-and-control regulation?

Accepted Answer

A)  ​Taxing producers based on the external costs created by their pollution, thus internalizing external costs. 
B)  ​ Requiring firms to reduce their pollution by 50 percent, thus allowing them to emit 50 percent of their historical emissions, and allowing them to freely buy and sell allowances. 
C)  ​Requiring firms to use a particular type of pollution-control technology, such as smokestack scrubbers or catalytic converters. 
D)  ​Subsidizing firms that exceed their pollution-control targets.​ 
A)  ​Taxing producers based on the external costs created by their pollution, thus internalizing external costs. 
B)  ​ Requiring firms to reduce their pollution by 50 percent, thus allowing them to emit 50 percent of their historical emissions, and allowing them to freely buy and sell allowances. 
C)  ​Requiring firms to use a particular type of pollution-control technology, such as smokestack scrubbers or catalytic converters. 
D)  ​Subsidizing firms that exceed their pollution-control targets.​

Question 15

Exhibit 14-1 Private and social cost
 
The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

Accepted Answer

A)  voluntarily incur costs to reduce its pollution. 
B)  produce at output rate Q3. 
C)  produce at output rate Q2. 
D)  produce at output rate Q4. 
A)  voluntarily incur costs to reduce its pollution. 
B)  produce at output rate Q3. 
C)  produce at output rate Q2. 
D)  produce at output rate Q4.

Question 16

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation.

Accepted Answer

@#IMG-DLM& The market results in too low a price a

Question 17

Exhibit 14-2 Cigarette smoking data Jack enjoys smoking, while Jill fears that second-hand smoke will shorten her life. The following table shows the value Jack places on each cigarette he smokes, and the value Jill places on her shortened life. Use the table to answer the following question(s):
 
As shown in Exhibit 14-2, if smokers have the right to smoke as many cigarettes as they wish, and non-smokers have the right to negotiate, how many cigarettes will Jack smoke?

Accepted Answer

A)  1. 
B)  3. 
C)  5. 
D)  more than 5. 
A)  1. 
B)  3. 
C)  5. 
D)  more than 5.

Question 18

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?

Accepted Answer

A)  The pollution will be created by those least willing and able to pay the damages. 
B)  The pollution will be created by those most willing and able to pay for the right to pollute. 
C)  The funds collected by the government will be enough to compensate any individuals harmed by the pollution. 
D)  Pollution will increase from zero to 1,000 units per day. 
A)  The pollution will be created by those least willing and able to pay the damages. 
B)  The pollution will be created by those most willing and able to pay for the right to pollute. 
C)  The funds collected by the government will be enough to compensate any individuals harmed by the pollution. 
D)  Pollution will increase from zero to 1,000 units per day.

Question 19

Exhibit 14-2 Cigarette smoking data Jack enjoys smoking, while Jill fears that second-hand smoke will shorten her life. The following table shows the value Jack places on each cigarette he smokes, and the value Jill places on her shortened life. Use the table to answer the following question(s):
 
As shown in Exhibit 14-2, what is the socially efficient number of cigarettes?

Accepted Answer

A)  0. 
B)  1. 
C)  3. 
D)  5. 
A)  0. 
B)  1. 
C)  3. 
D)  5.

Question 20

When using the traditional command-and-control approach to environmental regulation, the government attempts to:

Accepted Answer

A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement. 
B)  determine the most efficient method for different industries. 
C)  make allowances for differences across industries and between firms. 
D)  set standards that are applicable to all situations and does not recognize unique circumstances. 
A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement. 
B)  determine the most efficient method for different industries. 
C)  make allowances for differences across industries and between firms. 
D)  set standards that are applicable to all situations and does not recognize unique circumstances.

Exam 14: Environmental Economics

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

The hot spot problem is:

Which of the following is not an obstacle to achieving environmental efficiency through markets?

Cite an advantage and a disadvantage for command-and-control vs. incentive-based approaches. Then do the same for environmental taxes vs. emissions trading.

Explain why companies that choose low-pollution technologies will find it hard to survive in a competitive industry.

Which of the following statements is true ?

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

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):

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

Firms that emit toxins into the air:

To achieve social efficiency, the size of an effluent tax should be based on:

To increase society's total welfare (social efficiency), a production process that produces a negative externality should be:

Which of the following provides an example of command-and-control regulation?

Exhibit 14-1 Private and social cost The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation.

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?

When using the traditional command-and-control approach to environmental regulation, the government attempts to:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

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