Pollution - Analysis and Policy
Part A: Multiple-choice Questions
1. How do the marginal costs of pollution reduction and the marginal costs of pollution damage change as pollution levels increase?
1) The marginal costs of pollution reduction remain constant and the marginal costs of pollution increase
2) The marginal costs of pollution reduction increase and the marginal costs of pollution damage increase
3) The marginal costs of pollution reduction increase and the marginal costs of pollution damage decrease
4) The marginal costs of pollution reduction decrease and the marginal costs of pollution damage increase
5) The marginal costs of pollution reduction decrease and the marginal costs of pollution damage decrease
2. The optimal level of pollution occurs where ...
1) Total benefits equal total costs
2) Marginal benefits equal marginal costs
3) Private costs are minimized
4) Private benefits are maximized
5) Average revenue equals average cost
3. Annual automobile emissions testing is an example of which type of pollution policy?
1) Tradable permits
2) Pollution taxes
3) Pollution subsidies
4) Setting property rights
5) Standards
4. An emissions standard will work best in which of the following cases?
1) The marginal cost of pollution reduction curve is relatively flat
2) The marginal cost of pollution reduction curve is relatively steep
3) All firms have similar equipment and technology
4) The health effects of a pollutant are relatively unknown
5) Firms have very different equipment and technology
5. The main disadvantage of an emissions tax is that ...
1) The total pollution reduction from an emissions tax can not be known for sure
2) Firms lack the flexibility to pursue different technologies
3) Firms do not have an incentive to reduce pollution
4) Firms can not be behave in an economically-efficient manner
5) 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) Each firm will operate in an economically efficient manner
2) Total pollution levels in a region can be set by the government
3) The price of a permit will vary with changes in technology
4) The system is preferable to a pollution tax in all situations
5) Social benefits can be maximized
7. Which one of the following statements regarding transferable pollution permits is false?
1) An equilibrium permit price will be obtained through the trading of permits
2) Polluting firms generally prefer emissions standards to a system of tradable permits
3) A system of tradable permits was set up under the 1990 Clean Air Act Amendments
4) A system of tradable permits could be used to help reduce carbon dioxide emissions
5) 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) Emissions standards
2) Tradable permits
3) Pollution taxes
4) Pollution subsidies
5) Ecolabeling
9. Market-based regulations tend to work best with pollutants that ...
1) Are non-uniformly mixed and local in effect
2) Have threshold effects
3) Are uniformly mixed and regional in effect
4) Cause non-point source pollution
5) Have non-linear and local effects
10. An example of a non-point pollution source is ...
1) An automobile
2) A factory
3) A drain pipe
4) An agricultural field
5) A landfill
11. A preference for either taxes or permits to regulate pollution is dependent on the relative shape of what two curves?
1) Total cost of damage curve and total cost of pollution reduction curve
2) Marginal revenue of pollution control curve and marginal cost of damage curve
3) Marginal cost of pollution reduction curve and marginal cost of damage curve
4) Marginal benefit of pollution curve and marginal revenue of pollution curve
5) 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) The marginal costs of damages are steep and the marginal costs of pollution reduction are relatively stable
2) The marginal costs of damages are steep and the marginal costs of pollution reduction are steep
3) The marginal costs of damages are relatively stable and the marginal costs of pollution reduction are relatively stable
4) The marginal costs of damages are relatively stable and the marginal costs of pollution reduction are steep
5) 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) The marginal costs of damages are steep and the marginal costs of pollution reduction are relatively stable
2) The marginal costs of damages are steep and the marginal costs of pollution reduction are steep
3) The marginal costs of damages are relatively stable and the marginal costs of pollution reduction are relatively stable
4) The marginal costs of damages are relatively stable and the marginal costs of pollution reduction are steep
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) Technological progress will lower the price of transferable pollution permits
2) Under a pollution tax, technological progress will reduce overall pollution levels
3) Under a system of transferable permits, technological progress will reduce overall pollution levels
4) A pollution tax creates an incentive for technological progress
5) 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) Stock pollutants
2) Flow pollutants
3) Cumulative pollutant
4) Global pollutants
5) Transferable pollutants
16. An example of a global pollutant is ...
1) Chlorofluorocarbons (CFC's)
2) Ozone (O3)
3) Carbon monoxide (CO)
4) Nitrogen oxides (NOx)
5) Sulfur dioxide (SO2)
17. As emissions levels stabilize for a stock pollutant.
1) Health and other impacts also stabilize
2) Health and other impacts begin to decrease
3) Health and other impacts continue to increase
4) Health and other impacts may increase or decrease
5) Health and other impacts are reduced to zero
18. As emissions levels increase at a steady rate for a stock pollutant, accumulations ...
1) Decrease at a steady rate
2) Decrease at an exponential rate
3) Remain constant
4) Increase at a steady rate
5) Increase at an exponential rate
19. Which one of the following pollutant types is most difficult to regulate?
1) A local flow pollutant
2) A regional flow pollutant
3) A local stock pollutant
4) A regional stock pollutant
5) 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) It has been successful at reducing levels of both criteria and toxic pollutants
2) It has been unsuccessful at reducing levels of both criteria and toxic pollutants
3) It has been successful in reducing levels of criteria pollutants, but levels of toxic pollutants have increased
4) It has been successful in reducing levels of toxic pollutants, but levels of criteria pollutants have increased
5) It is too early to judge whether the Clean Air Act has reduced pollution levels
Part B: Qualitative Analysis
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.