Deck 4: Conventional Solutions to Environmental Problems: Command-And-Control Approach

Question 1

Marginal social benefit (MSB) of abatement can be thought of as the reduction in damages linked to reducing pollution.

Answer 1

True

Question 2

If an abatement standard is set to satisfy allocative efficiency on a national scale, that standard would not be optimal at the regional level unless the national MSB and MSC functions were identical to those at the regional level.

Answer 2

True

Question 3

The command-and-control approach to environmental policy uses rules, emissions limits, and various incentive-based policy instruments.

Answer 3

False

Question 4

Among the reasons that may explain why abatement standards are not set efficiently is imperfect information.

Question 5

Standards are the fundamental basis of most environmental policies.

Question 6

Suppose the combined abatement standard is set at 22 units and firm J and firm K have MAC functions of MAC_J = 0.5A, and MAC_K = 0.75A, respectively. If firm J is abating 10 units and firm K is abating 12 units, firm K should abate more units and firm J should abate less.

Question 7

According to the cost-effectiveness criterion, all polluting sources would abate pollution up to the point where their individual abatement levels were equal.

Question 8

Environmental standards can be specified as

A) ambient standards
B) performance-based standards
C) technology-based standards
D) all of the above
E) (a) and (b) only

Question 9

A standard that specifies a pollution limit along with the equipment to be used to achieve that limit is called a performance-based standard.

Question 10

By definition, the marginal abatement cost (MAC) curve shows the change in costs associated with higher levels of abatement, using the most widely available technology.

Question 11

If the MACs for firm 1 and 2 are: MAC₁ = 0.4A₁ and MAC₂ = 0.8A₂, respectively, and the combined abatement standard is 15 units, then the cost-effective abatement levels are 10 units for firm 1 and 5 units for firm 2.

Question 12

The sum of all polluters' MACs equals the marginal social cost (MSC) of abatement.

Question 13

If a standard is set to balance the well-being of society with the associated costs, it is called a benefit-based standard.

Question 14

If an environmental standard is set at a level where the associated marginal abatement cost (MAC) is equal to the marginal social benefit (MSB), it is considered an allocatively efficient standard.

Question 15

According to the cost-effective abatement criterion, all polluting sources would abate pollution up to the point where their individual total abatement cost (TAC) levels were equal.

Question 16

A standard that identifies a pollution limit to be achieved without defining the technology to be used is called a(n)

A) ambient standard
B) performance-based standard
C) technology-based standard
D) efficient standard

Question 17

Ambient standards identify the desired level of environmental level to be achieved, typically expressed as a maximum allowable concentration of a pollutant.

Question 18

The marginal cost of enforcement (MCE) must be added vertically to the MAC_mkt to derive the marginal social cost (MSC) of abatement function.

Question 19

According to the cost-effectiveness criterion, all polluting sources would abate pollution to the point where their individual marginal abatement cost (MAC) levels were equal.

Question 20

Much of the air pollution in Catano, Puerto Rico was linked to a nearby oil refinery.

Question 21

Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state authorities set a standard for the waterway that requires a combined abatement level (A) for chromium of 15 units. Suppose that the two firms, firm 1 and firm 2, face the following marginal abatement cost equations: MAC₁ = 3.2A₁ and MAC₂ = 0.8A₂, where costs are measured in thousands of dollars.
a. If the state uses a uniform standard, show that such a ruling would not be cost-effective. Which firm should be abating more, and which firm should be abating less?
b. Now find the cost-effective solution.

Question 22

Suppose that two firms, X and Y, face the following abatement costs:
MAC_X = 1.2A_X, MAC_Y = 0.3A_Y
TAC_X = 0.6A_X² TAC_Y = 0.15A_Y²
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .

-According to this model, if the government uses a uniform standard

A) firm Y would face a marginal abatement cost that is higher than that for firm Y
B) that standard would achieve a cost-effective solution
C) firm Y should do more of the abating and firm X should do less to move closer to a cost-effective solution
D) firm X's marginal abatement cost would be $48, and firm Y's marginal abatement cost would be $12

Question 23

A technology-based standard

A) specifies a pollution limit to be achieved and allows polluters to choose the technology to reach that limit
B) is more flexible than a performance-based standard
C) designates the equipment or control method to be used for pollution abatement
D) assures the use of the least-cost abatement technology.

Question 24

Suppose that two firms, X and Y, face the following abatement costs:
MAC_X = 1.2A_X, MAC_Y = 0.3A_Y
TAC_X = 0.6A_X² TAC_Y = 0.15A_Y²
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .

-The cost savings associated with the cost-effective solution relative to a uniform standard equals

A) $300
B) $108
C) $10.8
D) $9.60

Question 25

Hypothetically, suppose a recent study of hazardous waste abatement (A) arrives at the following national estimates for abating chemical solvents: MSB = 100 - 0.75A and MSC = 20 + 0.50A, where A is measured in millions of tons per year, and costs are measured in millions of dollars.
a. Based on this information, what would be the national standard for an allocatively efficient abatement?
b. Under what conditions would this level be efficient at the regional level?
c. If instead the government set the abatement standard at 50 million tons per year, would that standard be too lenient or too restrictive at the national level? Support your answer with specific values.

Question 26

An ambient standard

A) specifies a pollution limit and lets polluters choose the technology to achieve that limit
B) designates the equipment or control method that must be used to abate pollution
C) assures that the least-cost abatement approach will be used by all polluters
D) none of the above

Question 27

Suppose that two firms, X and Y, face the following abatement costs:
MAC_X = 1.2A_X, MAC_Y = 0.3A_Y
TAC_X = 0.6A_X² TAC_Y = 0.15A_Y²
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .

-Based on this model, if the government uses a uniform standard

A) the total abatement cost for firm X is $24
B) the total abatement cost for firm Y is $12
C) the combined total abatement cost for both firms is $1,200
D) the combined total abatement cost for both firms is $300

Question 28

According to the textbook application, recent EPA rules and regulations proposed under the Obama administration

A) fall into the category of market-based policies
B) have been met with wide approval among all constituencies
C) achieve allocatively efficient levels of pollution abatement
D) have been shown to meet the cost-effective criterion
E) none of the above

Question 29

According to the textbook application about Catano, Puerto Rico, the primary source of the severe air pollution in that city was identified to be

A) a nearby oil refinery
B) two large electrical power plants
C) large 18-wheelers transporting goods from nearby docks
D) a sewage sludge incinerator

Question 30

According to the criteria of cost-effectiveness, an abatement standard is set optimally if

A) that standard is benefit-based
B) it is set where the MSB of abatement is equal to Σ(MAC_mkt + MCE).
C) the standard is reached at minimum cost
D) it is set at the point where MSB of abatement equals zero
E) it is set at the point where MSC of abatement equals zero

Question 31

A performance-based standard

A) specifies a pollution limit and lets polluters select the technology to achieve that limit
B) is less flexible than a technology-based standard
C) designates the equipment or control method to be used for pollution abatement
D) none of the above

Question 32

A benefit-based standard

A) is one that balances social benefits with social costs, at the margin
B) achieves allocative efficiency
C) achieves a cost-effective level of pollution abatement
D) is set to improve society's well-being without consideration for costs

Question 33

The marginal social benefit (MSB) of abatement represents

A) the additional gains to society from reducing pollution
B) the reduction in damages from abatement
C) society's demand for abatement or environmental quality
D) all of the above

Question 34

To determine the marginal social cost (MSC) of abatement, we find the sum of

A) MPC + MAC
B) $\Sigma$ MAC + MCE
C) MAC + $\Sigma$ MCE
D) MAC + $\Sigma$ MEC

Question 35

Suppose that two firms, X and Y, face the following abatement costs:
MAC_X = 1.2A_X, MAC_Y = 0.3A_Y
TAC_X = 0.6A_X² TAC_Y = 0.15A_Y²
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .

-Based on the model given, the cost-effective solution would arise if

A) each firm abates 20 units of pollution
B) firm X abates 8 units, and firm Y abates 32 units
C) firm Y does all the abating because its MAC is lower
D) firm X abates 24 units, and firm Y abates 16 units
E) none of the above

Question 36

Based on the criteria of allocative efficiency, an abatement standard is set optimally if

A) that standard is benefit-based
B) it is set where the MSB of abatement is equal to Σ(MAC_mkt + MCE).
C) the least amount of resources is used to achieve the standard
D) it is set at the point where MSB of abatement equals zero

Question 37

A command-and-control approach to environmental policy

A) requires that the least amount of resources be used to achieve an objective
B) uses incentives to encourage pollution reduction
C) uses limits or restrictions to directly regulate polluters
D) is rarely used by governments in the United States and other nations

Question 38

The marginal cost of enforcement (MCE)

A) is the additional cost incurred by government to monitor and enforce abatement activity
B) is a negatively sloped function
C) can be measured as the vertical sum of MAC_mkt and MSC at any abatement level
D) represents the horizontal sum of all polluters' MAC functions

Question 39

It is highly unlikely that environmental standards are set at an efficient abatement level because of

A) legislative constraints
B) the absence of full information about the MSB and MSC of abatement
C) differences in MSB and MSC levels at the regional level
D) all of the above

Question 40

If an abatement standard is set to achieve allocative efficiency at the national level, then

A) that standard necessarily achieves allocative efficiency in all regions
B) the standard cannot be optimal at the regional level unless the MSB and MSC for all regions are identical to one another
C) all regions will abate below the optimal level
D) at that abatement standard, all regions will face MSC higher than MSB