Exam 16: External Costs and Environmental Policy

Recall the Application about determining the optimal level of methane abatement to answer the following question(s). -Recall the Application.What does the optimal level of methane abatement depend on?

Suppose that a paper producer is dumping waste into a nearby river.The government imposes a tax to correct for this external cost.What will be the effects of this pollution tax on the market for paper in a competitive market?

In most cases,taxation is more likely to be inefficient than regulation because taxation corrects for only external costs at a higher overall cost to society.

Command-and-control policies are more effective than pollution taxes.

In a market characterized by external benefits,the market equilibrium is not socially optimal.

Consumers,not producers,gain from pollution abatement.

Water pollution is not an example of an external cost.

If a tax is placed on the output of perfectly competitive firm that imposes external costs on society,the firm's marginal cost curve will shift ________ and the market supply curve will shift to the ________.

If a producer is imposing an external cost on society,the best response would be to

In essence,a pollution tax places a price on the right to pollute.

Table 16.1 -Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.For Producer Y,the marginal cost of reducing waste from 500 gallons to 400 gallons is

Recall the Application about the external cost of young drivers to answer the following question(s). -Recall the Application.Based on external cost,which of the following groups would pay the highest tax?

How does a system of marketable pollution permits affect the total cost of pollution abatement? Explain.

Under the command-and-control regulation,the supply curve for the polluting good will shift downward by a larger amount than it would with a tax regulation.

One advantage of pollution permits over pollution taxes is

When the government taxes a firm that generates an external cost,the profit-maximizing firm will produce

Give an example of an external cost and explain why the outcome is inefficient.

How does the outcome of a command-and-control policy compare with the outcome of a pollution tax?

The Environmental Protection Agency requires that automakers install equipment in vehicles that lowers emissions.In most cases a more efficient way of lowering the pollution generated by cars is to

Under a traditional pollution regulation,the government tells each firm how much pollution to abate and what abatement techniques to implement.