Question 1

Which of the following would an economist identify as a difficulty relating to environmental command-control regulations?

Accepted Answer

Environmental command-control regulations are often criticized for their inflexibility because they typically mandate specific limits or technologies without allowing firms to find the most cost-effective or innovative solutions to reduce pollution.

Question 2

Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking?

Accepted Answer

The principle that a system of voluntary exchange benefits both parties is a fundamental concept in the U.S. economic way of thinking, emphasizing that when transactions are voluntary, both the buyer and the seller benefit, leading to mutual gains and a more efficient allocation of resources.

Question 3

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day

Accepted Answer

High levels of industrial air pollutants affecting someone's health, especially if they are highly asthmatic, is considered a negative externality because it is an unwanted or harmful effect experienced by someone who did not choose to be exposed to that effect.

Question 4

Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be:

Accepted Answer

If firms pay for social costs, they will reduce pollution and production, and prices will rise to cover these costs.

Question 5

If no externalities of pollution exist in a particular industry, the interaction of demand and supply _______.

Accepted Answer

The interaction of demand and supply will coordinate social costs and benefits because, in the absence of externalities, the costs borne by producers and the benefits received by consumers reflect the true social costs and benefits of production and consumption.

Question 6

Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as _______.

Accepted Answer

The answer of Because of the nature of the comprehensive...

Question 7

In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time,

Accepted Answer

The command-and-control environmental laws of the early 1970s and their subsequent amendments are widely recognized for significantly contributing to the improvement of air and water quality in the United States over the past decades.

Question 8

If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes,

Accepted Answer

The manufacturer is considering the broader costs of environmental injuries, which are externalities not typically accounted for in the private costs of production. This means they are factoring in the social costs of pollution, which are costs borne by society rather than the firm itself.

Question 9

A _______ would lead a large greenhouse gas emitter to reduce emissions by less.

Accepted Answer

A lower pollution tax would lead a large greenhouse gas emitter to reduce emissions by less because the financial incentive to cut emissions is reduced compared to a higher tax rate.

Question 10

Which of the following would be classified as a situation where a third party benefits from a market transaction by others?

Accepted Answer

The purchase of trees for green space renewal projects by a city benefits not only the direct participants in the transaction (the city and the seller of the trees) but also the general public who will enjoy cleaner air, shade, and potentially enhanced property values due to the improved aesthetics and environmental quality. This is a classic example of a positive externality, where a third party benefits from a market transaction between others.

Question 11

If pollutants are emitted into the air and water, what costs might be incurred as a result?

Accepted Answer

All the options listed are potential costs incurred as a result of pollutants being emitted into the air and water. Compromised recreation possibilities, decreased property values, and loss from destruction of wildlife habitat are specific examples of such costs, while health injuries encompass a broad range of direct impacts on human well-being. Therefore, D, which includes all of the above, is the correct answer.

Question 12

If an externality of pollution exists for all manufacturers in a given industry, then all related social costs

Accepted Answer

Externalities like pollution are costs (or benefits) that are not reflected in market prices. In this case, the social costs of pollution are not included in the manufacturers' supply curves, which only account for private costs.

Question 13

The objective of imposing a higher pollution tax is to

Accepted Answer

The objective of imposing a higher pollution tax is to make it more costly for firms to pollute, thereby providing them with a financial incentive to reduce their emissions beyond the current levels to minimize their tax burden.

Question 14

Market-oriented environmental tools _______ for firms to take the social costs of pollution into account and _______ in reacting to these incentives.

Accepted Answer

Market-oriented environmental tools, such as taxes and tradable permits, create incentives for firms to internalize the social costs of pollution. They also provide firms with the flexibility to choose how to reduce emissions, encouraging innovation and cost-effective pollution control strategies.

Question 15

Why do U.S. economists commonly refer to externalities as an example of market failure?

Accepted Answer

Externalities present a situation where the full social costs (or benefits) of a market activity are not reflected in market prices. This means that the market outcome does not maximize societal welfare, leading to a market failure.

Question 16

The main categories of market-oriented approaches to pollution control are

Accepted Answer

Market-oriented approaches to pollution control include better-defined property rights, which help in assigning responsibility for pollution; marketable permits, which allow companies to buy and sell the right to pollute, thus incentivizing reductions in emissions; and pollution charges, which impose a cost on polluting, encouraging polluters to reduce emissions.

Question 17

To be effective, U.S. command-and-control environmental regulation required

Accepted Answer

Command-and-control environmental regulation in the U.S. involves making social costs of pollution unavoidable for businesses, requiring firms to consider these costs, and mandating the installation of specific anti-pollution equipment, all under the oversight of the Environmental Protection Agency (EPA).

Question 18

The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government

Accepted Answer

The environmental laws adopted during this period often mandated the use of specific pollution-control technologies to ensure that industries met the environmental standards set by the government. This approach was part of a broader strategy to reduce pollution and protect the environment.

Question 19

A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the of reducing the emissions is _______.

Accepted Answer

The correct answer is C) marginal cost; less than the tax. This is because a pollution charge (or tax) incentivizes firms to reduce emissions if the cost of reducing an additional unit of emissions (marginal cost) is lower than the tax for emitting. This way, firms can save money by reducing emissions rather than paying the tax.

Question 20

The arguments presented by economists regarding U.S. environmental command-and-control regulations generally

Accepted Answer

The answer of The arguments presented by economists regarding U.S....

Quiz 12: Environmental Protection and Negative Externalities