ECON 2J03 - Environmental Economics midterm exam | ECON2J03 Midterm Test; Already solved 100% Scored_ Latest Summer 2025*2026.

ECON 2J03 - Environmental Economics – Midterm EXAM_ 2025/26. Resources devoted to monitoring the behaviour of firms, agencies, and individuals subject to environmental regulations are called . Question 1 options: a) abatement costs b) enforcement costs Suppose a manufacturing firm that is about to be regulated faces the following actual and potential production costs: 1) $2,500 before regulation; 2) $2,925 in the future without the regulation; and 3) $3,240 in the future with the regulation. The before/after cost of the regulation is and the with/without cost of the regulation is . a) $425; $740 b) $425; $315 c) $740; $315 When environmental regulation of an entire industry results in output adjustments, the social cost of the regulation can be measured by the changes in consumer and producer surpluses. True When supply and demand are linear curves, the incidence of the tax depends on the slopes of the demand and supply curves.True Refer to Table below. If the with/without principle were applied to estimate the change in cost due to a new environmental regulation, the added costs due to the new regulation would be . Production costs before the regulation $ 200 Production costs in the future, without the regulation $ 250 Production costs in the future, with the regulation $ 290 Question 5 options: a) $90 b) $40 Enforcement costs for new protective programs include Question 6 options: a) resources devoted to monitoring the behavior of firms. Refer to the Figure below. Panel (a) and Panel (b) represent industries that have experienced cost increases due to environmental regulations. Assume that both price increases are equivalent. Which panel reflects less impact on the consumer and a large industry adjustment, in terms of less output?Question 7 options: a) Panel (a) reflects a larger industry adjustment. b) Panel (b) reflects a larger industry adjustment. Refer to the Figure below. In Panel (b), the increase in total cost of producing the original quantity of output at the new cost associated with increased environmental regulations would beQuestion 8 options: a) p2 x r1. b) (d + e + f). The change in consumer surplus resulting from an increase in environmental quality (a public good) can be measured in the same way as the change in consumer surplus for a private good Question 9 options: True The practice of estimating willingness to accept Question 10 options: a) asks how much compensation people require for a reduction in environmental quality. For a firm with more than one source of emissions, the states that the total costs of abating a givenabatement target will be minimized when the marginal costs of abatement are across sources. Question 11 options: The height of the marginal damage curve at a particular level of emissions shows how much total damages change if there is a small change in the quantity of emissions. Question 12 options: Refer to Figure below. Total damages associated with damage curve MD2 at an emissions level of e1 is . Question 13 options: a) $28 b) area a c) area b a) equimarginal principle; equalized True d) area a + bExternal costs can drive a wedge between the market demand curve and the social marginal WTP curve resulting in a market failure. Question 14 options: True False Refer to Figure below. At quantities lower than the socially efficient level, . Question 15 options: a) MWTP is higher than the marginal cost of production, the good is under supplied An example of an external cost of driving automobiles is Question 16 options: a) fuel or energy for the vehicle b) flat tire replacement c) insurance and registration d) road congestion Refer to Table below. At a market price of $4.00, what is industry supply? Marginal Costs Firm A Quantity Firm B Quantity Firm C Quantity Firm D Quantity $1.00 0 0 0 0 $2.00 5 0 0 3 $3.00 8 6 1 8$4. $5. Question 17 options: a) 0 b) 48 units c) $ 192.00 Low-phosphate detergents, mercury-free thermometers and energy-efficient appliances are all examples of . Question 18 options: a) pollution-intensive goods b) low-carbon goods c) environmentally friendly goods A living resource can become non-renewable if the rate of harvest exceeds the growth rate of the resource's stock. Question 19 options: True Economists believe people pollute because Question 20 options: a) people don't care b) people have too many options for their time c) governments are filled with corruption d) pollution is the cheapest waste disposal method of waste products Climate change models have predicted an increase in the earth's temperature, greater climate variability and more extreme weather events in the 21st century if greenhousegas emissions from human activity continue to be emitted at their current pace. Question 21 options: Many environmental issues are local or regional; however, some are international or global in scope. An example of a global environmental issue is . Question 22 options: a) destruction of the stratospheric zone b) greenhouse gases c) global warming Positive economics is the study of . Question 23 options: a) what will be b) what is c) beneficial economic outcomes What are some of the issues with Hedonic estimation? Question 24 options: a) Distortion of housing markets and prices due to too few sales b) It is not easy to measure environmental quality c) Environmental quality is a subjective matter In surveys and experimental work where people are asked to compare gains and losses relative to a reference point, True d) all of the above d) economic outcomes that are most likely d) all of the abovethey place a higher value on losses from this reference point than gains. Question 25 options: treats people in the same circumstances identically. Question 26 options: a) Vertical equity The following equations represent the inverse supply and demand functions in the market for Good A: PC = 180 - 2 QD PP = 40 + 2QS where PC and PP are the prices paid by consumers and received by producers respectively. QD and QS are the quantities demanded and supplied, respectively. Suppose the government imposes a tax of $8 per unit of Good A. What is the incidence of this tax on consumers and producers? As noted in the question, there are 2 scenarios. True b) Horizontal equityIn scenario that tax does not exist, 180 -2Qd =40+2Qs Thus, Q=35, Pc=Pp=110 In scenario that tax exists, 180 - 2Q- 40 - 2Q = 8, Thus, Q = 33, Pc = 180 - 2*33 = 114, Pp = 40 + 2*33 = 106 We can calculate that incidence on consumers is 114 - 110 =4 And incidence on producers is 110 - 106 = 4 The following equations represent the inverse supply and demand functions in the market for Good A: PC = 160 - 3QD PP = 20 + 2QS where PC and PP are the prices paid by consumers and received by producers respectively. QD and QS are the quantities demanded and supplied, respectively. Suppose the government imposes a tax of $5 per unit of Good A. What is the incidence of this tax on consumers and producers? when there is no tax, 160-3Qd=20+2Qs Q=28, Pc=Pp=76 when government imposes tax of $5, 160-3Qd-20-2Qs=5, Q=27, Pc=160-3*27=79, Pp=20+2*27=74 Incidence of tax on consumers=79-76=3 incidence of tax on producers=76-74=2Assume reductions in the amount of ground level ozone shift the marginal cost of producing alfalfa from MC1 = 35 + 2QS to MC2 = 35 + 0.5QS. Use the producer surplus to estimate the maximum amount alfalfa producers would be willing to pay for this improvement in the air quality if the market price of alfalfa is $50/unit of output. Before shift, 50=35+2Q, Q=7.5, producer surplus=0.5*(50-35)*7.5=56.25 After shift, 50=35+0.5Q, Q=30, producer surplus=0.5*(50-35)*30=225 The difference is the maximum amount alfalfa required by the question, which is 225- 56.25=168.75 Assume reductions in the amount of ground level ozone shift the marginal cost of producing alfalfa from MC1 = 30 + 2QS to MC2 = 30 + 0.5QS. Use the producer surplus to estimate the maximum amount alfalfa producers would be willing to pay for this improvement in the air quality if the market price of alfalfa is $40/unit of output. if no shift, 30+2Qs=40, Q=5, producer surplus=0.5*(40-30)*5=25 if there is shift, 30+0.5Qs=40, Q=20, producer surplus=0.5*(40-30)*20=100 maximum amount producer willing to pay=100-25=75The following equations represent the MWTP function and the private MC function in the market for some good where a negative externality (i.e., pollution) results in damages of $12 per unit of the good produced: MWTP = 65 – 0.5QD MPC=2+QS Solve for the competitive market equilibrium output and the socially efficient level of output for this market. to solve competitive market equilibrium output: we use 65-0.5Q=2+Q Q=42 to solve socially efficient level of output: we use 65-0.5Q=2+Q+12 Q=34 The following equations represent the MWTP function and the private MC function in the market for some good where a negative externality (i.e., pollution) results in damages of $6 per unit of the good produced: MWTP = 76 – 0.5QD MPC=4+QS Solve for the competitive market equilibrium output and the socially efficient level of output for this market. competitive market equilibrium output:76-0.5Q=4+Q Q=48 socially efficient output: 76-0.5Q=4+Q+6 Q=44 Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC = 4 + 0.25QS, firm 2's marginal cost equation is MC = 0.5QS and firm 3's marginal cost equation is MC = 2 + QS. What is the aggregate supply equation for this market? Firm 1 can be rewritten to: Qs= 4P–16 Firm 2: Qs=2P Firm 3: Qs=P–2 aggregate supply equation for this market: Qs=7P–18 Suppose there are three firms in the market for a certain good. Firm 1's marginal cost equation is MC = 6 + 0.5QS, firm 2's marginal cost equation is MC = 0.25QS and firm 3's marginal cost equation is MC = 4 + QS. What is the aggregate supply equation for this market? P=6+0.5Q -> Q = 2 P-12 P=0.25Q -> Q=4PP=4+Q -> Q=P-4 aggregate supply equation: Qs=2P-12+4P+P-4=7P-16