ECON3190 EXAM QUESTIONS WITH COMPLETE SOLUTIONS

1. Because cost data for compliance with environmental laws typically come from - ANSWER surveys of existing firms, they are often overstated 2. Cost effectiveness is a useful criterion for policy evaluation when - ANSWER the level of acceptable pollution is determined but not the means 3. Equity in an environmental policy is... - ANSWER a matter of opinion and varies across people and over time 4. Government failure refers to... - ANSWER the idea that gov regulations may result in inefficient allocation of resources 5. Liability laws can help lead to efficient pollution levels when... - ANSWER A. there are few people involved B. causal linkages are clear C. damages are easy to measure 6. Transaction costs are... - ANSWER costs such as negotiating and enforcing terms of transactions 7. Problems associated with property rights as a means of internalizing externalities include... - ANSWER A. incomplete markets B. high transaction costs C. free riding behavior associated with public goods 8. Lowering transaction costs results in... - ANSWER more transactions being made 9. A standard that designates the quality of the environment to be achieved is a(n) - ANSWER ambient standard 10. Emissions standards: - ANSWER limit the amount of pollution emitted by each pollution source 11. Command and control instruments include - ANSWER technology standards, effluent standards, and ambient standards 12. Technology standards - ANSWER direct producers to use specific processes to limit emissions 13. The equimarginal principle says that total costs of abating a certain amount of pollution are: - ANSWER minimized when all sources have equal marginal costs of abatement 14. Uniform emissions standards will generally be: - ANSWER inefficient if marginal abatement costs vary across polluting sources 15. Technology forcing: - ANSWER is designed to motivate the pollution control industry to invent new ways to meet environmental standards 16. An effective program to ensure compliance with environmental regulations includes... - ANSWER A. monitoring B. enforcement C. penalties 17. Incentive based pollution control regulations include: - ANSWER A. emission taxes B. abatement technology subsidies C. tradeable pollution permit programs 18. A two part emission charge... - ANSWER may allow a certain level of emissions to go untaxed then taxes emissions above that 19. All else constant, increasing an emission charge... - ANSWER results in lower levels of emissions 20. In offset trading markets... - ANSWER sellers agree to reduce emissions 21. The complication of nonuniform emissions can be addressed by - ANSWER zoned emission charges 22. Buying and selling of pollution permits can be set up as a - ANSWER cap and trade 23. Environmental subsidies for emission reductions can be implemented as... - ANSWER A. tax credits for purchase of pollution controlling equipment B. grants to encourage environmental programs C. cost sharing to cover a potion of the costs of abatement investment 24. Transferable emission permit programs: - ANSWER A. establish a total allowable level of emissions B. end of the open access use of the air or water in terms of the regulated pollutant C. are an example of a property rights based or incentive based solution 25. A "second best" tax policy... - ANSWER might, for example, be imposed on polluting inputs at the point of purchase 26. Which of the following types of pollution control regulations provides the most flexibility for producers in terms of how and how much they reduce emissions? - ANSWER emission taxes 27. If the marginal cost of abatement is less than the emissions charge, rational firms will: - ANSWER increase abatement 28. Environmental subsidies for emission reductions... - ANSWER create an opportunity cost for emitting pollution 29. Transfer coefficients... - ANSWER are used to adjust for trades across zones with differential marginal emissions damages 30. Which of the following pollution control regulations is generally cost effective for the level of abatement achieved by the regulation? - ANSWER emissions taxes 31. Transaction costs are... - ANSWER costs such as negotiating and enforcing terms of transactions 32. External benefits are... - ANSWER benefits falling on someone other than the decision maker creating the benefit 33. Social costs are... - ANSWER B. Those falling on individuals other than the decision maker C. Those falling on the individual making the decision leading to the cost 34. The equimarginal principle says that the... - ANSWER Lowest cost way to achieve a given goal is to equalize marginal cost across production sources 35. Economic efficiency is achieved when - ANSWER marginal willingness to pay equals the marginal cost of production 36. Use of an open access resource... - ANSWER tends to be greater than the socially optimal level 37. The major distinction between public and private goods is that... - ANSWER public goods are generally undersupplied by private firms 38. Which of the following is an example of an external cost - ANSWER A. impact of trash left at a campsite attracting skunks for the next campers 39. Reductions in damages from pollution - ANSWER are the benefits of abatement 40. As emissions increase, marginal damages tend to... - ANSWER increase 41. Marginal abatement costs ... - ANSWER decrease as emissions levels rise 42. The socially efficient level of emissions is when - ANSWER marginal damages from emissions equal marginal abatement costs 43. Technological improvements in abatement - ANSWER will result in the efficient level of emissions being lower 44. Identification and elaboration of all repercussions of a designated activity on the natural and environmental resource base is... - ANSWER Environmental impact analysis 45. Cost effectiveness is a useful alternative to benefit cost analysis when... - ANSWER There is agreement on the objective but not on the means of achieving it 46. An analysis that estimates the effect of designation of a new national park on employment levels and income of people living near the park is an example of... - ANSWER Economic impact analysis 47. A benefit cost ratio less than one implies... - ANSWER Net benefits are negative 48. Sensitivity analysis - ANSWER is useful to determine how net benefit changes if an important parameter in the analysis, such as the discount rate, changes 49. Discounting - ANSWER A. is a way to determine the current value of benefits or costs that will accrue in the future 50. B. allows comparison of policies that have different time profiles of net benefits. 51. A discounting rate of zero implies that... - ANSWER a dollar today is worth the same as a dollar in any other year 52. Vertical equity - ANSWER refers to treating differently situated people similarly 53. Risk benefit analysis is - ANSWER like cost benefit analysis in which the costs are measured in terms of risk 54. Environmental risk analysis involves the study of - ANSWER A. How different policies affects the levels on environmental risk to which people are exposed B. what values people place on risk reduction C. where risk comes from and how people normally respond to it 55. Directly questioning people about their willingness to pay for a good or service is... - ANSWER a stated preference method 56. The value of statistical life (VSL) is a measure - ANSWER the value of reducing the probability of illness or premature death for a random individual in the population 57. Direct measures of reduction in damages of pollution include... - ANSWER A. value of increased labor productivity B. reduced health care costs related to asthma C. value of changing in producer surplus of agricultural production 58. Revealed preference methods of valuation: - ANSWER can be inferred from a person's actions The travel cost method is based on the premise that... - ANSWER cost of traveling to a site can be regarded as the price of access to the site Which of the following is an example of an averting behavior model for measuring the benefits people would put on cleaning up pollution? - ANSWER expenditures on new water filters to avoid contaminants that cause health problems