Exam 5: The Economics of Environmental Regulation I: Emission Standards and Effluent Charge

Enforcement of environmental standards is usually a state or local responsibility, but many enforcement actions require the resources of both federal and state authorities.

The total cost of pollution control is minimized when the marginal control costs are the same for all the firms engaged in pollution control activities.

Figure 5A -Refer to Figure 5A. Which of the following is correct?

Figure 5A -Refer to Figure 5A. Which of the following is correct?

Figure 5B -Refer to Figure 5B. Assume that the initial effluent tax in the amount of tk, or $20 per unit of waste discharged and that the MCC curve represents the nature of the pollution control technology of this firm. Which of the following is correct?

Figure 5B -Refer to Figure 5B. Assume that the initial effluent tax in the amount of tk, or $20 per unit of waste discharged and that the MCC curve represents the nature of the pollution control technology of this firm. Which of the following is correct?

The optimal effluent charge is attained any point where MCC > MDC.

If public authorities set an emission standard at the social optimal level and strictly enforce it, polluters will end up internalizing the cost of controlling pollution emissions up to the socially optimal level.

A transferable discharge permit places the _________ limit of pollution for a(n) _________ is allowed to discharge into the environment.

Figure 5A -Refer to Figure 5A. Which of the following is incorrect concerning the figure.

Figure 5A -Refer to Figure 5A. Which of the following are correct?

When an effluent charge is cost-effective, it is also socially optimal.

Emission standards tend to perform well in inducing innovation and technological change.

When a profit-maximizing firm is confronted with an effluent charge, it would be in its best interests to treat its waste whenever the cost of treating an additional unit of waste was more than the effluent tax.

Public intervention in the market for environmental goods and services is justifiable because private markets usually cannot achieve a socially optimal level of emission control.

A drawback of emission standards is that they are likely to benefit existing firms.

When control costs turn out to be less than expected, environmental policy based on effluent taxes would allow waste discharges in excess of what is considered to be socially optimal.

Emission standards adhere to the polluter pays principles, and thus tend have a moral appeal.

Environmental regulations operate purely on a command-and-control principle, and not on the premise of financial incentive or disincentive.

Which of the following is not an advantage of emission standards?