ECON 310 Chapter 3 Study Quiz Answers
______1. A.C. Pigou was among the first to recognize the existence of
a. pollution emissions.
b. marginal damage functions.
c. externalities.
d. transaction costs.
Answer: c
______2. The assumptions behind the Coase Theorem are:
a. small number of parties involved, small transactions costs and initial allocation of property rights to offending party.
b. small number of parties involved, small transaction costs.
c. small number of parties involved, initial allocation of the property rights to party who is suffering externality.
d. government allocation of property rights.
Answer:
b
______3. According to the author, all of the following are drawbacks associated with the Coase Theorem except
a. transactions cost are not likely to be small.
b. an efficient market can not develop with asymmetric prices.
c. initial allocation of property rights will not effect the market solution.
d. transaction costs are likely to be positively correlated with the
numbers of parties involved.
e. none of the above.
Answer:
e
______4. Moral suasion is
a. a term used to describe the governmental attempts to influence behavior with actually stipulating rules.
b. a tool used by government and many not-for-profit organizations in campaigns to reduce waste and promote recycling.
c. not a useful option in environmental policy.
d. both a and b above.
e. all of the above.
Answer: d
______5. Command and control regulations
a. are useful economic tools for encouraging appropriate environmental action.
b. are appropriate when the optimal level of pollution is at or near zero.
c. are appropriate when monitoring costs are low.
d. all of the above.
Answer: b
______6. A marginal damage function represents
a. the costs associated with reducing pollution to a lower level.
b. the increase in damage that results from an increase in the level of pollution.
c. the opportunity costs associated with production of a good or service.
d. includes the costs of labor, capital and energy needed to lessen the emission of pollution.
e. both a and d.
Answer: b
______7. The optimal level of pollution abatement across two firms is
a. a mandated reduction of equal quantities by each firm.
b. a reduction of emission levels by each firm to the point where marginal abatement costs are equal across firms.
c. a reduction of emission levels by each firm to the point where emission levels are equal.
d. none of the above.
Answer: b
______8. In a market composed of two polluters, what is the level of pollution for each polluter if the marginal abatement costs of polluter 1 and 2, are represented by the following equations:
MAC(1) = 18 - E1
MAC(2) = 12 - 2E2
and a tax of $8 per unit is imposed upon the polluters?
a. 14 units by polluter 1 and 8 units by polluter 2.
b. 18 units by polluter 1 and 8 units by polluter 2.
c. 10 units by polluter 1 and 2 units by polluter 2.
d. none of the above.
Answer: c
______9. Marketable pollution permits are an alternative market mechanism to pollution control. These marketable pollution permits are sometimes referred to as
a. transferable discharge permits.
b. transferable emission permits.
c. marketable emission rights.
d. both a and b.
e. none of the above.
Answer:
d
______10. Marketable pollution permits require a slightly more complex system when there are geographical differences in pollution effects. Two possible approaches to designing a system of permits are ________ and ________.
a. variable tax system; establishing separate markets for each subregion.
b. the ambient based system; establishing separate markets for each subregion.
c. the ambient based system; a variable tax system.
d. establishing separate markets for each subregion; separate permit auctions.
Answer: b
______11. Pollution subsidies are payments per unit of pollution reduced. Recent studies have suggested that pollution subsidies
a. change incentives for firm entrance.
b. result in a more equitable distribution of the pollution reduction burden.
c. are more efficient than deposit-refund approaches to rewarding recycling.
d. are more feasible than other political alternatives.
Answer: a