TEST # 10 – CHAPTER 16
Pollution - Analysis and Policy
Name _____________________________________ Test Score________ Part A: Multiple-choice Questions (40 points)
1. How do the marginal costs of pollution reduction and the marginal costs of pollution
damage change as pollution levels increase?
1)
2)
3)
4)
5) The marginal costs of pollution reduction remain constant and the marginal costs
of pollution increase
The marginal costs of pollution reduction increase and the marginal costs of
pollution damage increase
The marginal costs of pollution reduction increase and the marginal costs of
pollution damage decrease
The marginal costs of pollution reduction decrease and the marginal costs of
pollution damage increase
The marginal costs of pollution reduction decrease and the marginal costs of
pollution damage decrease 2. The optimal level of pollution occurs where ...
1)
2)
3)
4)
5) Total benefits equal total costs
Marginal benefits equal marginal costs
Private costs are minimized
Private benefits are maximized
Average revenue equals average cost 3. Annual automobile emissions testing is an example of which type of pollution policy?
1)
2)
3)
4)
5) Tradable permits
Pollution taxes
Pollution subsidies
Setting property rights
Standards 4. An emissions standard will work best in which of the following cases?
1)
2) The marginal cost of pollution reduction curve is relatively flat
The marginal cost of pollution reduction curve is relatively steep
1 3)
4)
5) All firms have similar equipment and technology
The health effects of a pollutant are relatively unknown
Firms have very different equipment and technology 5. The main disadvantage of an emissions tax is that ...
1)
2)
3)
4)
5) The total pollution reduction from an emissions tax can not be known for sure
Firms lack the flexibility to pursue different technologies
Firms do not have an incentive to reduce pollution
Firms can not be behave in an economically-efficient manner
Differences among firms are not incorporated into the policy 6. Which one of the following statements is false regarding a transferable pollution
permit system?
1)
2)
3)
4)
5) Each firm will operate in an economically efficient manner
Total pollution levels in a region can be set by the government
The price of a permit will vary with changes in technology
The system is preferable to a pollution tax in all situations
Social benefits can be maximized 7. Which one of the following statements regarding transferable pollution permits is
false?
1)
2)
3)
4)
5) An equilibrium permit price will be obtained through the trading of permits
Polluting firms generally prefer emissions standards to a system of tradable
permits
A system of tradable permits was set up under the 1990 Clean Air Act
Amendments
A system of tradable permits could be used to help reduce carbon dioxide
emissions
A system of tradable permits achieves a given level of pollution reduction at the
lowest cost 8. For a pollutant like lead, which causes health effects to local residents even at very low
levels, which regulatory approach would be most effective for eliminating any health
threats?
1)
2)
3)
4)
5) Emissions standards
Tradable permits
Pollution taxes
Pollution subsidies
Ecolabeling 9. Market-based regulations tend to work best with pollutants that ...
1)
Are non-uniformly mixed and local in effect
2 2)
3)
4)
5) Have threshold effects
Are uniformly mixed and regional in effect
Cause non-point source pollution
Have non-linear and local effects 10. An example of a non-point pollution source is ...
1)
2)
3)
4)
5) An automobile
A factory
A drain pipe
An agricultural field
A landfill 11. A preference for either taxes or permits to regulate pollution is dependent on the
relative shape of what two curves?
1)
2)
3)
4)
5) Total cost of damage curve and total cost of pollution reduction curve
Marginal revenue of pollution control curve and marginal cost of damage curve
Marginal cost of pollution reduction curve and marginal cost of damage curve
Marginal benefit of pollution curve and marginal revenue of pollution curve
Marginal utility of pollution curve and marginal cost of regulation 12. Transferable permits are likely to result in less inefficiency, relative to a pollution tax,
when ...
1)
2)
3)
4)
5) The marginal costs of damages are steep and the marginal costs of pollution
reduction are relatively stable
The marginal costs of damages are steep and the marginal costs of pollution
reduction are steep
The marginal costs of damages are relatively stable and the marginal costs of
pollution reduction are relatively stable
The marginal costs of damages are relatively stable and the marginal costs of
pollution reduction are steep
The marginal costs of damage are elastic and the marginal costs of pollution
reduction are also elastic 13. A pollution tax would be preferable to a system of transferable permits when...
1)
2)
3)
4) The marginal costs of damages are steep and the marginal costs of pollution
reduction are relatively stable
The marginal costs of damages are steep and the marginal costs of pollution
reduction are steep
The marginal costs of damages are relatively stable and the marginal costs of
pollution reduction are relatively stable
The marginal costs of damages are relatively stable and the marginal costs of
pollution reduction are steep
3 5) The marginal costs of damages are elastic and the marginal costs of pollution
reduction are also elastic 14. Which one of the following statements is false?
1)
2)
3)
4)
5) Technological progress will lower the price of transferable pollution permits
Under a pollution tax, technological progress will reduce overall pollution levels
Under a system of transferable permits, technological progress will reduce overall
pollution levels
A pollution tax creates an incentive for technological progress
Under a system of transferable permits, technological progress can result in some
firms increasing their pollution levels 15. Pollutants that have a short-term impact and then dissipate are called ...
1)
2)
3)
4)
5) Stock pollutants
Flow pollutants
Cumulative pollutant
Global pollutants
Transferable pollutants 16. An example of a global pollutant is ...
1)
2)
3)
4)
5) Chlorofluorocarbons (CFC’s)
Ozone (O3)
Carbon monoxide (CO)
Nitrogen oxides (NOx)
Sulfur dioxide (SO2) 17. As emissions levels stabilize for a stock pollutant ...
1)
2)
3)
4)
5) Health and other impacts also stabilize
Health and other impacts begin to decrease
Health and other impacts continue to increase
Health and other impacts may increase or decrease
Health and other impacts are reduced to zero 18. As emissions levels increase at a steady rate for a stock pollutant, accumulations ...
1)
2)
3)
4)
5) Decrease at a steady rate
Decrease at an exponential rate
Remain constant
Increase at a steady rate
Increase at an exponential rate 4 19. Which one of the following pollutant types is most difficult to regulate?
1)
2)
3)
4)
5) A local flow pollutant
A regional flow pollutant
A local stock pollutant
A regional stock pollutant
A global stock pollutant 20. Which one of the following statements best describes the results of the Clean Air Act
in the United States?
1)
2)
3)
4)
5) It has been successful at reducing levels of both criteria and toxic
pollutants
It has been unsuccessful at reducing levels of both criteria and toxic pollutants
It has been successful in reducing levels of criteria pollutants, but levels of toxic
pollutants have increased
It has been successful in reducing levels of toxic pollutants, but levels of criteria
pollutants have increased
It is too early to judge whether the Clean Air Act has reduced pollution levels Part B: Qualitative Analysis (10 points)
Please complete (in Microsoft Word document) the following questions:
Question # 1: List and discuss a situation where emissions standards would be preferable to
either pollution taxes or a system of transferable permits?
Question # 2: Explain how an economist would determine the optimal level of a pollution
tax. What is the major uncertainty in using a pollution tax?
Question # 3: What are some particular problems with stock pollutants? Why might a
reduction in emissions levels of a stock pollutant be insufficient in reducing the negative
effects of the pollutant?
Discussion Question # 4: Textbook, Chapter 16, page 405. 5

 

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