Question 1

In general,the economist's view on allocating resources to reduce pollution is that

Accepted Answer

The economist's view is that the reduction of pollution should proceed up to the point where the marginal cost of pollution reduction equals the marginal benefit to society. This is because reducing pollution beyond this point would result in resources being diverted away from other productive activities, ultimately reducing social welfare. Therefore, the optimal level of pollution reduction should be determined by comparing the marginal costs and marginal benefits of pollution reduction.

Question 2

A paper mill discharges chemicals into a river which washes the shores of a downstream resort area.The private marginal cost,social marginal cost,and marginal benefit associated with the production of paper are given by the following equations: MCP = 5 + Q,MCS = 10 + 2Q,and MB = 35 - 0.5Q.A competitive free market will produce output of units,and this amount is than the allocatively efficient level of output.

Accepted Answer

D

Question 3

The diagram below shows the private and social marginal costs (MCP and MCS)and the social marginal benefits (MBS)of producing disposable diapers.
  FIGURE 17- 2
-Refer to Figure 17- 2.The net social benefit derived from the production and use of disposable diapers is

Accepted Answer

E

Question 4

Economists often argue that a system of tradable pollution permits is cost- effective because

Accepted Answer

Tradable pollution permits allow firms to choose their level of pollution abatement based on the price of the permits. Firms with a low marginal cost of abatement will choose to reduce their pollution levels and sell their excess permits to firms with a higher marginal cost of abatement. This results in a more efficient allocation of resources and reduces the overall cost of abatement for society. Firms with a high marginal cost of abatement will choose to purchase permits rather than abating at a higher cost, which also reduces overall costs. Thus, the market determines the optimal level of pollution abatement based on the price of the permits, which is the same for all firms.

Question 5

Two firms,A and B,are legally required to reduce their toxic emissions.If Firm A's marginal cost of abatement is $5 and Firm B's marginal cost of abatement is $5,

Accepted Answer

When both firms have the same marginal cost of abatement, the joint total cost of abatement is minimized, as the cost of reducing emissions is equalized across firms.

Question 6

The diagram below shows a market for tradable pollution permits.
  Figure 17- 7
-Refer to Figure 17- 7,which depicts the market for tradable pollution permits.If the environmental organization called "Friends of the Earth" buys a large quantity of pollution permits and permanently decides not to use them,then

Accepted Answer

If "Friends of the Earth" buys a large quantity of pollution permits and permanently decides not to use them, then the supply of pollution permits decreases. This means that the supply curve will shift to the left. As a result, the equilibrium price will rise, since the demand for pollution permits remains unchanged. Therefore, the correct answer is A. Allocative efficiency is not lost in this situation as the market still determines the optimal quantity of pollution permits that should be emitted.

Question 7

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q0 units of pollution.
  FIGURE 17- 6
-Refer to Figure 17- 6.Suppose that a system of tradable pollution permits is introduced into this market and the equilibrium permit price is p×.Firm A will sell permits to Firm B because

Accepted Answer

The answer of The diagram below shows the marginal cost...

Question 8

Suppose the government imposes an emissions tax of $t on each unit of pollution produced by a firm.Under which of the following circumstances would the tax rate be set too high to achieve allocative efficiency?

Accepted Answer

If the tax rate is set greater than the marginal external cost of pollution, it is possible that the tax rate is too high to achieve allocative efficiency. This is because the goal of the emissions tax is to align the private cost of production with the social cost by making the firm pay for the externalities it imposes on society. If the tax rate exceeds the marginal external cost of pollution, it may lead to overcompensation of the harm caused, resulting in a loss of economic efficiency. Therefore, the tax rate should be set equal to the marginal external cost of pollution to achieve allocative efficiency.

Question 9

Consider a coal- fired electric- power plant that is operating under a cap- and trade- system.If its marginal cost of pollution abatement is $5 per unit and the price of the permit is $3 per unit,this firm will

Accepted Answer

The firm will buy permits because the cost of buying a permit ($3) is less than the cost of abating pollution ($5), making it cheaper to buy permits and reduce less pollution.

Question 10

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good.
  FIGURE 17- 1
-Refer to Figure 17- 1.The price that leads consumers to demand the socially optimal quantity of output is

Accepted Answer

The socially optimal quantity of output is where the marginal benefit (MB) curve intersects the marginal cost (MC) curve. In Figure 17-1, this occurs at point E, where the price is P3.

Question 11

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good.  FIGURE 17- 1
-Refer to Figure 17- 1.A negative externality is depicted because the

Accepted Answer

The marginal social cost (MCS) is higher than the marginal private cost (MCP) at each level of output. This indicates that there is a negative externality present, as the production of the good is imposing costs on society beyond what the private firms are experiencing. Therefore, the optimal level of output would be lower than the level at which MCP intersects with MB, as the additional costs to society are not being reflected in the private market.

Question 12

In a competitive market for tradable pollution permits,the quantity of permits (for a given amount of pollution)is set by and the equilibrium price is determined by _.

Accepted Answer

The government sets the quantity of pollution permits, while the equilibrium price is determined by market forces through the interaction of supply and demand for those permits.

Question 13

Suppose a firm producing roof shingles imposes a negative externality on the surrounding area due to the noxious fumes emitted from the plant.The private marginal cost,social marginal cost and marginal benefit associated with the production of the shingles are given by the following equations: MCp = 5 + 2Q MCs = 10 + 3Q MB = 50 - Q
What level of emissions tax (dollars per unit of output produced)would provide this firm with the incentive to produce at the allocatively efficient level of output?

Accepted Answer

The answer of Suppose a firm producing roof shingles imposes...

Question 14

The figure below shows the demand and supply curves for pollution abatement.
  FIGURE 17- 3
-Refer to Figure 17- 3.On the horizontal axis,the label "Qt(100% abatement)" refers to

Accepted Answer

The label "Qt(100% abatement)" on the horizontal axis refers to zero remaining pollution, indicating that 100% of the pollution has been abated or removed.

Question 15

When firms in an industry have fully internalized a production externality,

Accepted Answer

When firms in an industry have fully internalized a production externality, they bear the entire social marginal cost of production. This means that they take into account the costs imposed on society from their production activities and adjust their production levels accordingly. As a result, they produce at the socially optimal level of output, achieving allocative efficiency. Therefore, option D is the correct choice.

Question 16

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q0 units of pollution.
  FIGURE 17- 6
-Private and competitive markets could produce efficient levels of pollution if

Accepted Answer

The diagram shows that both firm A and B have increasing marginal costs of abatement, meaning it becomes more expensive to reduce pollution as they abate more. To achieve an efficient level of pollution, the appropriate tax per unit of pollution should be administered and enforced. This would incentivize firms to reduce pollution up to the point where the marginal cost of abatement equals the tax per unit of pollution, leading to a socially optimal level of pollution. Without government intervention, firms would only consider their private costs and continue to pollute beyond the socially optimal level, resulting in negative externalities for society as a whole.

Question 17

Consider global greenhouse- gas emissions.Suppose that in 2012,greenhouse gases emitted per unit of energy consumed decreased by 2%,energy use per unit of GDP decreased by 2%,and world GDP increased by 4%.What will be the approximate change in global greenhouse gas emissions in 2012?

Accepted Answer

The answer of Consider global greenhouse- gas emissions.Suppose that in...

Question 18

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good.
  FIGURE 17- 1
-Consider the following equation: GHG = GHG × Energy × GDP,
Energy GDP
Where GHG = world annual emissions of greenhouse gases Energy = world annual amount of energy consumed GDP = world's annual gross domestic product
The ratio Energy/GDP describes

Accepted Answer

The ratio Energy/GDP describes the number of units of energy used per dollar of GDP produced.

Question 19

Global greenhouse- gas (GHG)emission reductions are unlikely to be achieved through GDP reductions because

Accepted Answer

The ongoing population growth and per capita income growth are likely to drive GDP upward, indicating that GDP reductions are unlikely to be achieved.

Question 20

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q0 units of pollution.
  FIGURE 17- 6
-Refer to Figure 17- 6.Suppose that a system of tradable pollution permits is introduced into this market and the equilibrium permit price is p*.The effect will be that

Accepted Answer

According to the diagram, Firm A has a lower marginal cost of pollution abatement than Firm B at the initial level of Q0. Therefore, Firm A has an advantage in reducing pollution and can sell permits to Firm B. Firm B, on the other hand, has a higher marginal cost of abatement and can reduce its costs by buying permits from Firm A and polluting more. Therefore, the correct answer is D, where Firm B buys permits from Firm A and Firm A sells permits to Firm B. This will result in Firm B polluting more and reducing its costs by the area 1, and Firm A polluting less but earning less due to the reduction in permit sales and the increase in the cost of pollution abatement by the area 5.

Quiz 17: The Economics of Environmental Protection

In general,the economist's view on allocating resources to reduce pollution is that

The diagram below shows the private and social marginal costs (MCP and MCS) and the social marginal benefits (MBS) of producing disposable diapers. FIGURE 17- 2 -Refer to Figure 17- 2.The net social benefit derived from the production and use of disposable diapers is

Economists often argue that a system of tradable pollution permits is cost- effective because

Two firms,A and B,are legally required to reduce their toxic emissions.If Firm A's marginal cost of abatement is $5 and Firm B's marginal cost of abatement is $5,

Suppose the government imposes an emissions tax of $t on each unit of pollution produced by a firm.Under which of the following circumstances would the tax rate be set too high to achieve allocative efficiency?

Consider a coal- fired electric- power plant that is operating under a cap- and trade- system.If its marginal cost of pollution abatement is $5 per unit and the price of the permit is $3 per unit,this firm will

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good. FIGURE 17- 1 -Refer to Figure 17- 1.The price that leads consumers to demand the socially optimal quantity of output is

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good. FIGURE 17- 1 -Refer to Figure 17- 1.A negative externality is depicted because the

In a competitive market for tradable pollution permits,the quantity of permits (for a given amount of pollution) is set by and the equilibrium price is determined by _.

The figure below shows the demand and supply curves for pollution abatement. FIGURE 17- 3 -Refer to Figure 17- 3.On the horizontal axis,the label "Qt(100% abatement) " refers to

When firms in an industry have fully internalized a production externality,

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q0 units of pollution. FIGURE 17- 6 -Private and competitive markets could produce efficient levels of pollution if

Consider global greenhouse- gas emissions.Suppose that in 2012,greenhouse gases emitted per unit of energy consumed decreased by 2%,energy use per unit of GDP decreased by 2%,and world GDP increased by 4%.What will be the approximate change in global greenhouse gas emissions in 2012?

Global greenhouse- gas (GHG) emission reductions are unlikely to be achieved through GDP reductions because