ECON 2100 Exam #2
UGA with complete
verified solutions
An environmental standard that speicifies a pollution limit along with the
equipment to be used to achieve that limit is called a performance-based
standard. T/F - answer True (Technology-based standard)
Suppose the combined abatement standard is set at 20 units and firm J and
firm K have MAC functions of
MACJ = 0.5A and MACK=0.75A, respectively.
Then, firm J should abate __ units and firm K should abate __ units. - answer
12, 8 (Needs to add up to 20, plus correct ratios)
If the MACs for firm 1 and 2 are:
MAC1 = 0.4A1 and MAC2 = 0.8A2, respectively, and the combined
abatement standard is 15 units, then the cost-effective abatement levels are
__ units for firm 1 and __ units for firm 2. - answer 10, 5 (Needs to add up to
15 plus ratios)
The marginal cost of enforcement (MCE) must be added vertically to the
MAC(mkt) to derive the marginal social cost (MSC) of abatement function. T/F
- answer True (MSC=MAC+MCE)
If an abatement standard is set to satisfy allocative efficiency on a national
scale, that standard would not be optimal at the regional level unless the
national MSB and MSC functions were identical to those at the regional level.
T/F - answer True
, In a cap and trade system with two polluters with different costs of marignal
abatement (MAC), the high cost polluter will buy (identify the strict condition)
a permit from the low cost polluter as long as: - answer Price charged by the
low cost polluter is lower than the MAC of the high cost polluter.
Market-based instruments are a secondary form of control when it comes to
environmental problems. T/F - answer True
A pollution charge can be implemented as a emission charge. T/F - answer
True
Suppose a firm faces an emission charge implemented as a marginal tax
(MT) of 12 and that its MAC = 0.6A. Calculate the abatement level (A) (use
only whole numbers, no decimals) at which the firm would be indifferent
between paying a tax and abatement. - answer 20 (MAC x A = MT ->
0.6A=12 -> A=20)
The most commonly used market based instrument to control pollution,
internationally, is a - answer Pollution charge
Suppose an industrial unit is releasing emissions into the air leading to
health problems and environmental issues. The marginal costs, marginal
benefits of production, respectively, are as follows
MSB = 60 - 0.4Q
MSC = 10 + 0.1Q
MEC = .05Q Q is the output in units and P is the price per unit.
The product charge (Pigouvian tax) needed to achieve a socially efficient
outcome is $ __. (Do not put in the $ sign or use decimals). - answer 5 (1. Set
MSB=MSC and solve for Q 2. Plug Q value into MEC to get Product charge)
According to the cost-effective abatement criterion, all polluting sources
would abate pollution up to the point where their individual total abatement
cost (TAC) levels were equal. T/F - answer False (will continue until MACs are
equal)
UGA with complete
verified solutions
An environmental standard that speicifies a pollution limit along with the
equipment to be used to achieve that limit is called a performance-based
standard. T/F - answer True (Technology-based standard)
Suppose the combined abatement standard is set at 20 units and firm J and
firm K have MAC functions of
MACJ = 0.5A and MACK=0.75A, respectively.
Then, firm J should abate __ units and firm K should abate __ units. - answer
12, 8 (Needs to add up to 20, plus correct ratios)
If the MACs for firm 1 and 2 are:
MAC1 = 0.4A1 and MAC2 = 0.8A2, respectively, and the combined
abatement standard is 15 units, then the cost-effective abatement levels are
__ units for firm 1 and __ units for firm 2. - answer 10, 5 (Needs to add up to
15 plus ratios)
The marginal cost of enforcement (MCE) must be added vertically to the
MAC(mkt) to derive the marginal social cost (MSC) of abatement function. T/F
- answer True (MSC=MAC+MCE)
If an abatement standard is set to satisfy allocative efficiency on a national
scale, that standard would not be optimal at the regional level unless the
national MSB and MSC functions were identical to those at the regional level.
T/F - answer True
, In a cap and trade system with two polluters with different costs of marignal
abatement (MAC), the high cost polluter will buy (identify the strict condition)
a permit from the low cost polluter as long as: - answer Price charged by the
low cost polluter is lower than the MAC of the high cost polluter.
Market-based instruments are a secondary form of control when it comes to
environmental problems. T/F - answer True
A pollution charge can be implemented as a emission charge. T/F - answer
True
Suppose a firm faces an emission charge implemented as a marginal tax
(MT) of 12 and that its MAC = 0.6A. Calculate the abatement level (A) (use
only whole numbers, no decimals) at which the firm would be indifferent
between paying a tax and abatement. - answer 20 (MAC x A = MT ->
0.6A=12 -> A=20)
The most commonly used market based instrument to control pollution,
internationally, is a - answer Pollution charge
Suppose an industrial unit is releasing emissions into the air leading to
health problems and environmental issues. The marginal costs, marginal
benefits of production, respectively, are as follows
MSB = 60 - 0.4Q
MSC = 10 + 0.1Q
MEC = .05Q Q is the output in units and P is the price per unit.
The product charge (Pigouvian tax) needed to achieve a socially efficient
outcome is $ __. (Do not put in the $ sign or use decimals). - answer 5 (1. Set
MSB=MSC and solve for Q 2. Plug Q value into MEC to get Product charge)
According to the cost-effective abatement criterion, all polluting sources
would abate pollution up to the point where their individual total abatement
cost (TAC) levels were equal. T/F - answer False (will continue until MACs are
equal)
