Question 1

Which of the following is NOT a policy option for dealing with environmental pollution?

Accepted Answer

A)  requiring that firms that pollute locate away from populated areas 
B)  prohibiting activities that generate pollution 
C)  requiring firms to adopt pollution-control technology 
D)  dictating maximum permissible levels of output

Question 2

At what point does the optimal level of pollution abatement in the steel industry occur?

Accepted Answer

A)  where the total cost of abatement is equal to the total benefit from abatement 
B)  where the marginal social cost of producing steel is equal to the demand for steel 
C)  where the marginal social cost of abatement is equal to the marginal social benefit from abatement 
D)  where the marginal private cost of abatement is equal to the marginal social benefit from abatement

Question 3

FIGURE 12-1
 
-Refer to Figure 12-1, which represents a hypothetical market for steel. What is the marginal external cost equal to?

Accepted Answer

A)  FG 
B)  FH 
C)  GH 
D)  OF

Question 4

Why do tradable pollution permits provide an incentive to reduce pollution?

Accepted Answer

The answer of Why do tradable pollution permits provide an...

Question 5

FIGURE 12-3
 
-Refer to Figure 12-3, which represents the market for pulp, the production of which creates dioxin emissions. Suppose the market is currently producing at the profit maximizing point and the government wishes to impose a tax to correct the overallocation of resources caused by the externality. How much revenue would the government receive?

Accepted Answer

A)  $4 million 
B)  $8 million 
C)  $12 million 
D)  $16 million

Question 6

The marginal social benefit of pollution abatement is likely to be lower in rural areas than it is in urban areas.

Accepted Answer

A) True 
 B)False

Question 7

When a negative externality is present, the socially optimal level is less than the private market equilibrium.

Accepted Answer

A) True 
 B)False

Question 8

People that choose to live near airports must put up with the noise associated with aircrafts arriving and departing. Which of the following best describes how those people are compensated for the negative externality that they face?

Accepted Answer

A)  They have been compensated for the externality by the airlines. 
B)  They have been compensated for the externality with easier access to the airport. 
C)  They have been compensated for the externality with lower housing costs. 
D)  They have been compensated for the externality by the government.

Question 9

FIGURE 12-1
 
-Refer to Figure 12-1, which represents a hypothetical market for steel. To internalize the externality, what is the per unit amount that the firms would have to pay society equal to?

Accepted Answer

A)  OH 
B)  ACB 
C)  FHAC 
D)  HF

Exam 12: The Environment