Exam 16: External Costs and Environmental Policy

If a pollution tax is imposed on automobiles,we could expect which of the following to occur?

Why would a firm continue to pollute even when it is fined (taxed)for doing so?

The social cost of production is the sum of the private cost and external cost.

The ability of marketable pollution permits to efficiently lower the level of pollution is dependent on the initial allocation of the permits.

The annual cost of collisions in the United States is approximately $300 billion.On average,the driver who causes an accident incurs about ________ of the costs,leaving the rest as an external cost imposed on others.

A command-and-control policy causes firms to use inefficient abatement technologies,so production costs will be higher than they would be under a pollution tax.

Recall the Application about how to wash carbon out of the air to answer the following question(s). -Recall the Application.Assume a firm that produces CO₂ has a marginal cost of abatement of $45 per ton and faces a carbon tax of $35 per ton.If the cost of carbon washing is $25 per ton,the firm could save ________ per ton and emit ________ carbon into the atmosphere by using a carbon washing machine.

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 X,the marginal cost of reducing waste from 500 gallons to 400 gallons is

A pollution tax lowers the price of the good or service produced by the polluting firm in a competitive market.

Taxes on external costs are unlike other taxes because they

If the government taxes a firm that is generating an external cost,the price of the firm's product will ________ and output will ________.

Under a command-and-control policy,there is no incentive to develop better abatement techniques.

If we compare the effects of a pollution tax with those of a command-and-control policy,production cost will be

The optimum level of pollution abatement is where the marginal benefit is greater than the marginal cost.

The idea behind the pollution tax equal to the external cost per unit of pollution is to

Command-and-control policies mandate

If the government were to limit the release of air pollution produced by a chemical company to 20,000 units,this policy would be considered a

Recall the Application about the external cost of young drivers to answer the following question(s). -Recall the Application.The goal of taxing drivers for each mile they drive is to

Under a system of marketable pollution permits,the ________ amount of permits supplied,the ________ the equilibrium price charged for each permit:

A company earns $70,000 in profit if it is allowed to dump untreated waste in the river and only $40,000 in profit if it is forced to treat the waste before dumping it into the river.The local fishermen earn $35,000 in profit if the river is polluted and $55,000 in profit if the river is not polluted.The fishermen would be willing to pay the company up to ________ not to pollute the river,and the company would be willing to accept a minimum of ________ if it agrees not to pollute the river.