Question 1

The main advantage of using market-based schemes for reducing pollution is that they

Accepted Answer

Market-based schemes incentivize individuals and firms to reduce pollution by allowing them to save money through more efficient practices. This leads to a more efficient use of the scarce resources involved in the production process. Options A and B are not necessarily benefits of market-based schemes, while options D and E are not accurate descriptions of their main advantage.

Question 2

When designing a policy to reduce polluting emissions,policymakers are unlikely to know with certainty what the marginal cost of abatement is for each firm.If an emissions tax ($t per unit of emissions)is imposed,then policymakers

Accepted Answer

Imposing an emissions tax sets a specific per-unit cost for emissions, making the cost to firms for each unit of pollution they emit known to policymakers. However, since the marginal cost of abatement varies across firms and policymakers cannot predict each firm's response to the tax (i.e., how much they will reduce emissions to avoid the tax), the total reduction in emissions is uncertain.

Question 3

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q 0 units of pollution.
  FIGURE 17-7
-Refer to Figure 17-7.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

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

Question 4

When designing a policy to reduce polluting emissions,policymakers are unlikely to know with certainty what the marginal cost of abatement is for each firm.If policymakers set an emissions cap of X units,and issue tradable permits for this amount,then they

Accepted Answer

Setting an emissions cap and issuing tradable permits provides certainty about the overall reduction in emissions, but does not provide information about the per-unit cost to firms. The cost of reducing emissions will differ across firms, depending on their production processes and technologies. Tradable permits allow firms to determine the most cost-effective way to reduce their emissions, but policymakers will not know the exact cost for each individual firm.

Question 5

In 2006,Professor Nicolas Stern of the United Kingdom stated ʺClimate change is the greatest market failure the world has ever seen.ʺ Which of the following statements describes the biggest challenge to efforts to begin correcting this market failure?

Accepted Answer

The biggest challenge to correcting the market failure of climate change is the need for global coordination and cooperation in policy design and implementation. Climate change is a global problem that requires all major governments to take action, and any one country's efforts alone will not be enough to effectively address the issue. Therefore, international cooperation is crucial. Options A, B, and D primarily focus on the costs and actions of individual governments, while option E suggests that climate change is not comparable to a market failure, which is not accurate.

Question 6

The diagram below shows a market for tradable pollution permits.
  FIGURE 17-8
-Refer to Figure 17-8,which depicts a market for tradable pollution permits.Improvements in firmsʹ abatement technology will be expected to

Accepted Answer

Improvements in firms' abatement technology make it cheaper and easier for firms to reduce pollution. This reduces the demand for pollution permits because firms can more easily meet environmental standards without needing to purchase additional permits. Hence, the demand curve for pollution permits shifts to the left.

Question 7

The diagram below shows a market for tradable pollution permits.
  FIGURE 17-8
-Refer to Figure 17-8,which depicts the market for tradable pollution permits.If there is an increase in firmsʹ marginal cost of pollution abatement,

Accepted Answer

When firms face an increase in their marginal cost of pollution abatement, it becomes more expensive for them to reduce pollution through abatement measures. As a result, they may find it more cost-effective to pollute and cover their emissions by purchasing additional pollution permits, leading to an increased demand for these permits.

Question 8

Consider a coal-fired electric-power plant that is operating under a system of tradable pollution permits (and the firm currently owns permits).If its marginal cost of pollution abatement is $100 per unit and the price of the permit is $150 per unit,this firm will

Accepted Answer

Since the marginal cost of pollution abatement ($100) is less than the price of the permit ($150), it is cheaper for the firm to abate pollution than to buy additional permits. Therefore, the firm will opt to sell its permits (because they are worth more on the market) and abate more pollution to comply with regulations, making option E the correct choice.

Question 9

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q 0 units of pollution. FIGURE 17-7 -Refer to Figure 17-7.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

Firm A will sell permits to Firm B because the revenue Firm A earns from selling permits (areas 5 + 6) is greater than the cost it incurs from abating more pollution (area 6). This means that Firm A will be better off selling permits and letting Firm B abate more pollution.

Question 10

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 at $3 per unit and will abate pollution up to the point where the marginal cost of abatement is equal to the permit price, which is $3 per unit. This means the firm will abate less pollution than if the marginal cost of abatement was less than or equal to the permit price. Therefore, the firm will buy permits and abate less pollution.

Question 11

Consider the following equation:

Where GHG = world annual emissions of greenhouse gases Energy = world annual amount of energy consumed GDP = worldʹs annual gross domestic product
The ratio GHG/Energy describes

Accepted Answer

The GHG/Energy ratio describes the units of greenhouse gases emitted per unit of energy consumed.

Question 12

The diagram below shows a market for tradable pollution permits.
  FIGURE 17-8
-Refer to Figure 17-8,which depicts the market for tradable pollution permits.The amount of permits Q* is determined by

Accepted Answer

The amount of permits Q* in a market for tradable pollution permits is determined by the relevant government. The government sets the total amount of pollution allowed, and thus the total number of permits available, based on environmental policy goals.

Question 13

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

In a competitive market for tradable pollution permits, the government sets the quantity of permits available, which is a form of government policy. However, the equilibrium price at which these permits are traded is determined by market forces such as the supply and demand for pollution permits among firms. Therefore, the best choice is C, which states that the quantity of permits is set by government policy and the equilibrium price is determined by market forces.

Question 14

The diagram below shows a market for tradable pollution permits.
  FIGURE 17-8
-Refer to Figure 17-8,which depicts the market for tradable pollution permits.If the environmental organization called ʺFriends of the Earthʺ 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, the total supply of permits in the market decreases. This means that the supply curve shifts to the left, leading to a higher equilibrium price for pollution permits. This is because there are now fewer permits available for polluters to purchase, leading to increased competition for the remaining permits and a higher price. Therefore, the correct answer is choice C.

Question 15

When comparing a system of emission taxes to a system of tradable pollution permits,the same amount of pollution could be abated in each as long as

Accepted Answer

Both systems can achieve the same amount of pollution abatement if the cap on emissions in the permit system is set so that the equilibrium price of the permits equals the emissions tax rate. This ensures that firms face the same cost for polluting across both systems, leading to similar incentives for reducing emissions.

Question 16

Suppose a competitive market for tradable pollution permits is in equilibrium at p*,with the quantity of permits being set by government policy at Q*.If technological advances reduce the marginal cost of pollution abatement,then

Accepted Answer

When technological advances reduce the marginal cost of pollution abatement, firms can reduce pollution more cheaply. This decreases the demand for pollution permits, leading to a lower equilibrium price (p*) for these permits in the market.

Question 17

The diagram below shows a market for tradable pollution permits.
  FIGURE 17-8
-Refer to Figure 17-8,which depicts the market for tradable pollution permits.The equilibrium price p*

Accepted Answer

The equilibrium price p* in a market for tradable pollution permits is determined by the intersection of the demand curve for permits and the supply curve of permits. At p*, the marginal benefit of additional permits (represented by the demand curve) is equal to the marginal cost of reducing pollution (represented by the supply curve). For profit-maximizing firms, the marginal cost of reducing pollution is equal to the marginal abatement cost, so p* equals the marginal abatement cost for each profit-maximizing firm.

Question 18

Between 1995 and 2011,Canadaʹs greenhouse gas emissions  ________ by ________%

Accepted Answer

The answer of Between 1995 and 2011,Canadaʹs greenhouse gas emissions...

Question 19

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q 0 units of pollution.
  FIGURE 17-7
-Refer to Figure 17-7.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

With the introduction of tradable pollution permits, Firm B will be able to abate pollution at a lower cost than Firm A (up until the point where their marginal costs intersect), leading to Firm B abating more pollution (Q1) and Firm A reducing their abatement (Q2). Therefore, the correct answer is choice C.

Question 20

The diagram below shows the marginal cost of abatement for each of two firms,A and B.Each firm is initially abating Q 0 units of pollution.
  FIGURE 17-7
-Refer to Figure 17-7.Suppose that a system of tradable pollution permits is introduced into this market and the equilibrium permit price is p*.Firm B will buy permits from Firm A because

Accepted Answer

Firm B will buy permits from Firm A because the cost of buying the permits (areas 2 + 3) is less than the total savings from abating less (areas 1 + 2 + 3). This allows Firm B to reduce its overall costs of pollution abatement.

Quiz 17: The Economics of Environmental Protection

The main advantage of using market-based schemes for reducing pollution is that they

When designing a policy to reduce polluting emissions,policymakers are unlikely to know with certainty what the marginal cost of abatement is for each firm.If an emissions tax ($t per unit of emissions) is imposed,then policymakers

When designing a policy to reduce polluting emissions,policymakers are unlikely to know with certainty what the marginal cost of abatement is for each firm.If policymakers set an emissions cap of X units,and issue tradable permits for this amount,then they

In 2006,Professor Nicolas Stern of the United Kingdom stated ʺClimate change is the greatest market failure the world has ever seen.ʺ Which of the following statements describes the biggest challenge to efforts to begin correcting this market failure?

The diagram below shows a market for tradable pollution permits. FIGURE 17-8 -Refer to Figure 17-8,which depicts a market for tradable pollution permits.Improvements in firmsʹ abatement technology will be expected to

The diagram below shows a market for tradable pollution permits. FIGURE 17-8 -Refer to Figure 17-8,which depicts the market for tradable pollution permits.If there is an increase in firmsʹ marginal cost of pollution abatement,

Consider a coal-fired electric-power plant that is operating under a system of tradable pollution permits (and the firm currently owns permits) .If its marginal cost of pollution abatement is $100 per unit and the price of the permit is $150 per unit,this firm will

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

Consider the following equation: Where GHG = world annual emissions of greenhouse gases Energy = world annual amount of energy consumed GDP = worldʹs annual gross domestic product The ratio GHG/Energy describes

The diagram below shows a market for tradable pollution permits. FIGURE 17-8 -Refer to Figure 17-8,which depicts the market for tradable pollution permits.The amount of permits Q* is determined by

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 .

When comparing a system of emission taxes to a system of tradable pollution permits,the same amount of pollution could be abated in each as long as

Suppose a competitive market for tradable pollution permits is in equilibrium at p,with the quantity of permits being set by government policy at Q.If technological advances reduce the marginal cost of pollution abatement,then

The diagram below shows a market for tradable pollution permits. FIGURE 17-8 -Refer to Figure 17-8,which depicts the market for tradable pollution permits.The equilibrium price p*

Between 1995 and 2011,Canadaʹs greenhouse gas emissions by %