Deck 10: Decentralized Policies: Liability Laws, Property Rights, and Voluntary Action

Question 1

The concept of strict liability means that

A)polluters will be held responsible for damages regardless of the situation
B)damages will be interpreted strictly, and compensation will be the highest level determined
C)there are strict laws that interpret responsibility even if the polluter is a group
D)penalties will be strictly assigned as incarceration

Answer 1

A

Question 2

When people can negotiate with each other to come up with mutually satisfactory ways to deal with environmental externalities with little or no involvement of the government this is referred to as ________.

A)moral suasion
B)an incentive-based approach
C)a decentralized approach
D)a centralized approach

Answer 2

C

Question 3

Common law systems rely on court proceedings where claims and counter claims are adjudicated to determine damages and compensation.These proceedings can involve

A)a private party making claims of damages to private assets
B)a private party making claims of damages to public assets
C)a public agency claiming damages to public assets
D)all of the above

Answer 3

D

Question 4

The success of statutory laws relies on aligning the compensatory damages assigned to each polluter with

A)the marginal abatement costs
B)the actual amount of damages they cause
C)the amount of transactions costs
D)the costs of clean up

Question 5

Nonjoint liability means

A)that only one party caused the damages
B)that only one party may be held responsible for the damages
C)only one party can sue for damages
D)parties cannot be held liable for two different damages resulting from the same action

Question 6

Liability laws are one of the ways to ________ an externality.

A)internalize
B)eliminate
C)increase
D)privatize

Question 7

Which of the following is NOT a reason why private bargaining can fail to achieve the socially optimal level of emissions?

A)The resource is an open-access good making it difficult to assign property rights.
B)Net social gains depend on the initial assignment of property rights.
C)Restrictions on use prevent property owners from capturing social values.
D)Transaction costs are too high due to the necessity to include many parties in the negotiations.

Question 8

The problem of misuse of many environmental assets is a result of

A)imperfectly specified property rights
B)private ownership of most environmental assets
C)public ownership of most environmental assets
D)high transaction costs

Question 9

Refer to the figure above.If the damaging firm is emitting at the uncontrolled emissions level but is required to compensate damaged firms and individuals, the amount of that compensation would be

A)a
B)(a+b+c)
C)d
D)(b+c+d)

Question 10

In the U.S.courts, those seeking to be compensated for damages due to environmental pollution must

A)demonstrate that the emissions at issue caused the damages that are presented
B)demonstrate that the emissions at issue came from the specific defendant
C)file an action within a specified period of time (typically 2-3 years)
D)all of the above

Question 11

________ suggest(s) that in the presence of an externality bargaining can achieve the socially efficient equilibrium regardless of the initial allocation of property rights.

A)Liability laws
B)The Coase theorem
C)The legal doctrine of standing
D)The burden of proof

Question 12

Suppose both a chemical company and a commercial fishery operate on the same river.According to the Coase theorem the socially efficient level of emissions can be reached through bargaining between the two parties if ________ has the right to use the river.

A)just the chemical company
B)just the fishery
C)either the chemical company or the fishery
D)the regulator

Question 13

When a resource has no owner

A)it has no marketable value
B)there is no need to protect the resource
C)no one has a very strong incentive to see that it is not degraded in quality
D)all of the above

Question 14

Regardless of who has the property rights to environmental resources

A)net social gains are the same independent of who holds the property rights to pollute
B)net gains to society differ depending upon who holds the property rights to pollute
C)net gains accumulate to individuals, not society
D)a socially efficient equilibrium offers no net gains because MAC will equal MD

Question 15

Refer to the figure above.If the damaging firm is emitting at the uncontrolled emissions level but is required to compensate damaged firms and individuals, the damaging firm has an incentive to

A)stop emissions entirely
B)reduce emissions until total abatement costs are equal to total damages
C)reduce emission to e*, where marginal damages are equal to marginal abatement costs
D)stay at the current level of emissions (e₁) and pay the damages

Question 16

If the MAC and MD curves do not change based on who has the property rights,

A)multiple socially efficient equilibrium can be reached
B)no socially efficient equilibrium can be reached
C)a different socially efficient equilibrium will be reached dependent on who holds the rights to pollute
D)the same socially efficient equilibrium will be reached independent of who holds the rights to pollute

Question 17

The Coase theorem states that social efficiency can be obtained through bargaining and

A)gains to each party involved will be identical regardless of who has the rights
B)net gains to each party depend on the initial allocation of property rights
C)net gains accumulate to society, not individuals
D)a socially efficient equilibrium offers no net gains because MAC will equal MD

Question 18

Goods that give the same level of pleasure as ordinary goods but that involve less environmental damage in either their production, use or disposal are known as ________.

A)generic goods
B)luxury goods
C)green goods
D)environmental goods

Question 19

Negligence is a form of common law that

A)holds polluters responsible regardless of whether they have taken steps to avoid damages
B)holds polluters responsible only if they have not taken steps to avoid the damages
C)holds polluters responsible for neglect of an asset
D)holds government accountable for neglecting to protect public assets

Question 20

Liability laws are an effective way to incentivize efficient pollution solutions when

A)relatively few parties are involved
B)causal linkages are clear
C)damages are easy to measure
D)all of the above

Question 21

Because of the lack of markets, many countries have sought to develop an innovative property rights plan called

A)internalizing externalities
B)the Coase Theorom
C)payment for environmental services
D)Comprehensive Environmental Response, Compensation and Liability Act

Question 22

Production and consumption of green goods shifts the marginal abatement cost curve

A)upward
B)downward
C)steeper
D)flatter

Question 23

The likelihood of free riding in the production of environmental quality increases

A)over time
B)when the number of parties affected is large
C)exponentially
D)in command economies

Question 24

The Emergency Planning and Community Right to Know Act (1986) and the Pollution Prevention Act (1990) require polluters to report toxic emissions in an attempt to leverage _____________ to fight pollution

A)informal community pressure
B)asymmetric information
C)moral suasion
D)transaction costs

Question 25

Transaction costs ________ with the number of parties involved.

A)do not vary directly
B)increase
C)decrease
D)vary inversely

Question 26

Nonjoint liability means

A)that only one party caused the damages
B)that only one party may be held responsible for the damages
C)only one party can sue for damages
D)parties cannot be held liable for two different damages resulting from the same action

Question 27

Environmental quality improvements are public good so we should expect ____________.

A)free riding
B)government failure
C)transaction costs
D)asymmetric information

Question 28

Informal community pressure is considered informal because

A)the pressure is placed on community not the government, to stop polluting
B)no media attention is given to this type of action
C)there are no statutes or legal means used to assert the pressure
D)the pressure relies on the moral compass of the polluters

Question 29

In order for a property rights approach to produce an efficient level of environmental pollution the following conditions must be met:

A)property rights must be well defined, enforceable and transferable
B)there must be a system for efficient negotiation about property rights to be negotiated
C)there must be a set of markets for environmental assets
D)all of the above