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ECON 2100 Exam 2 Questions and Correct
Answers
The marginal cost of enforcement (MCE) must be added vertically
to the MACmkt to derive the
marginal social cost (MSC) of abatement function. Ans: True
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. Ans:
True
Suppose the combined abatement standard is set at 20 units and
firm J and firm K
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have MAC functions of MACJ = 0.5A and MACK=0.75A,
respectively.
Then, firm J should abate __ units and firm K should abate __
units. Ans: 12, 8
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. Ans: 10, 5
An environmental standard that specifies a pollution limit along
with the equipment to be used to achieve that limit is called a
performance-based standard. Ans: False
Suppose that for some abatement equipment market, the marginal
social benefit,
MSB = 500 - 1Q,
and marginal private benefit,
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MPB = 300 - 0.8Q,
then the Pigouvian subsidy must equal _____ at the efficient output
level. Ans: 200 - 0.2Q
Market-based instruments are a secondary form of control when it
comes to environmental problems. Ans: True
Suppose an industrial unit is releasing emissions into the air
leading to health problems and environmental issues. The
marginal costs, marginal benefits of production are as follows
MSB=60-0.4Q,MSC=10+0.1Q,MEC=0.05Q
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). Ans: 5
© 2025 All rights reserved
ECON 2100 Exam 2 Questions and Correct
Answers
The marginal cost of enforcement (MCE) must be added vertically
to the MACmkt to derive the
marginal social cost (MSC) of abatement function. Ans: True
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. Ans:
True
Suppose the combined abatement standard is set at 20 units and
firm J and firm K
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, 2 | Page
have MAC functions of MACJ = 0.5A and MACK=0.75A,
respectively.
Then, firm J should abate __ units and firm K should abate __
units. Ans: 12, 8
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. Ans: 10, 5
An environmental standard that specifies a pollution limit along
with the equipment to be used to achieve that limit is called a
performance-based standard. Ans: False
Suppose that for some abatement equipment market, the marginal
social benefit,
MSB = 500 - 1Q,
and marginal private benefit,
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, 3 | Page
MPB = 300 - 0.8Q,
then the Pigouvian subsidy must equal _____ at the efficient output
level. Ans: 200 - 0.2Q
Market-based instruments are a secondary form of control when it
comes to environmental problems. Ans: True
Suppose an industrial unit is releasing emissions into the air
leading to health problems and environmental issues. The
marginal costs, marginal benefits of production are as follows
MSB=60-0.4Q,MSC=10+0.1Q,MEC=0.05Q
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). Ans: 5
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