Deck 8: Benefit-Cost Analysis: Costs

Question 1

If the before/after 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 ________.

A)$90
B)$40
C)$50
D)$290

Answer 1

A

Question 2

Refer to the Figure above.In Panel (a), the increase in cost of producing the original quantity of output at the new cost associated with increased environmental regulations would be

A)p₂ x q₁
B)( a + b + c)
C)p₂ x q₂
D)p₁ x q₁

Answer 2

B

Question 3

Suppose a manufacturing firm that is about to be regulated faces the following actual and potential production costs: 1) $4,000 before regulation; 2) $4,550 in the future without the regulation; and 3) $5,200 in the future with the regulation.The true cost of the proposed regulation, invoking the with/without principle, is ________.

A)$550
B)$1,200
C)$650
D)impossible to determine from the information provided.

Answer 3

C

Question 4

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
D)$315; $425

Question 5

Social costs are equal to

A)private welfare - social welfare
B)private costs + social welfare
C)private costs - external costs
D)private costs + external costs

Question 6

When evaluating proposals for building a new municipal sewage treatment plant, a benefit-cost analysis does not have to include the cost of the land if it is to be donated.

A)does not have to include the cost of the land if it is donated.
B)must include the value of the land even if it is donated.
C)may or may not include the cost of the land if it is donated, depending on whether the donor is a private or public entity.
D)benefit-cost studies are not appropriate for municipal projects.

Question 7

If the before/after 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 ________.

A)$90
B)$40
C)$50
D)$290

Question 8

When examining the costs associated with a local regulation, the affected local community believes the local social costs are high and

A)the broader social opportunity costs are high
B)the broader social opportunity costs are low
C)industry production is often reduced
D)industry employment rates are often impacted

Question 9

A region is considering two sites on which to locate a new wastewater treatment plant. Site A has been owned by the region for five years and the region initially paid $200,000 for the land.The current market value of the site is $400,000.Site B is land the region would have to purchase for $300,000.What is the social opportunity cost of each site?

A)$200,000 for Site A; $300,000 for Site B
B)$300,000 for Site A; $300,000 for Site B
C)$400,000 for Site A; $300,000 for Site B
D)The social opportunity cost should be state for the project, not each site and would be equal to the lowest value for either site, $200,000

Question 10

A city is evaluating a proposal to build a recycling depot.If a generous citizen is willing to donate land for the project with a current market value of $800,000, the ________ of the land is ________.

A)social opportunity cost; $0
B)social opportunity cost; unknown
C)private cost to the city; $800,000
D)social opportunity cost; $800,000

Question 11

Refer to the Figure above.Panel (b) represents an industry that has experienced cost increases due to environmental regulations.The price increase that the industry experiences, from p₁ to p₂ is

A)is equal to the cost increase, from c₁ to c₂
B)is less than the cost increase, from c₁ to c₂
C)is greater than the cost increase, from c₁ to c₂
D)cannot be accurately stated from the picture

Question 12

Refer to the Figure above.Panel (a) represents an industry that has experienced cost increases due to environmental regulations.The price increase that the industry experiences, from p₁ to p₂ is

A)is equal to the cost increase, from c₁ to c₂
B)is less than the cost increase, from c₁ to c₂
C)is greater than the cost increase, from c₁ to c₂
D)cannot be accurately stated from the picture

Question 13

Illegal roadside dumping resulting from the introduction of waste disposal charges is one example of the ________ of an environmental policy.

A)pollution control cost
B)enforcement cost
C)unintended consequences
D)before/after result

Question 14

Another term for pollution taxes is ___________.These are payments from one group, the polluters, to another group, the administering agency or beneficiary of the tax.

A)transfer payments
B)opportunity costs
C)external costs
D)enforcement costs

Question 15

Refer to the Figure above.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 fewer workers and less output?

A)Panel (a) reflects a larger industry adjustment
B)Panel (b) reflects a larger industry adjustment
C)Panel (a) and Panel (b) reflect the same industry impact
D)The graphs do not indicate which industry is affected more by the regulations

Question 16

When providing costs associated with industry regulations that allow firms latitude in their response, the analysis must first begin with

A)identification of alternatives that firms might pursue
B)the impact that the regulation has on production
C)the impact that the regulation has on employment
D)the impact that the regulation might have on product prices

Question 17

Cost data gathered to construct a representative firm

A)is collected by surveying current firms in the industry
B)can be misrepresentative when the industry is comprised of heterogeneous firms
C)is typically more accurate for historical costs than future costs under new regulations
D)all of the above

Question 18

An example of a cost to a private group that is not a cost from the standpoint of society is

A)the cost of inputs
B)a tax
C)pollution
D)opportunity cost

Question 19

Cost of environmental quality programs can be estimated at a variety of different levels.Perhaps the most straightforward level would be

A)costs of single facilities
B)costs of a local regulation
C)costs of regulating an industry
D)costs at the national level

Question 20

Environmental protection and control programs can also have adverse environmental effects and additional costs.Some of these effects and costs include

A)Media switching
B)Unforeseen impacts as consumers and firms adjust to new programs
C)Mitigating programs meant to reduce or avoid additional environmental impacts
D)all of the above

Question 21

A cost baseline analysis entails

A)an estimation of what costs would be for a firm/industry without any environmental regulations
B)an exact accounting of costs for a firm/industry with existing regulations at the moment
C)the estimation of what the firm/industry future cost levels could be expected to be in the absence of a proposed regulation
D)the estimation of what the firm/industry future/industry cost levels would be if the proposed environmental legislation were enacted

Question 22

Refer to the Figure above.In Panel (b), the increase in cost of producing the original quantity of output at the new cost associated with increased environmental regulations would be

A)p₂ x r₁
B)( d + e + f)
C)p₂ x r₂
D)p₁ x r₁

Question 23

In effect, the production of power (electricity) without pollution control leads to production distortions and is equivalent to

A)public subsidies for agriculture
B)coastal flood zone insurance
C)neither A nor B
D)both A and B

Question 24

When estimating the future costs of adopting future technology for environmental protections and the relevant time horizon is 10 years or longer, the cost projections are complicated due to

A)uncertainty regarding what technology will be available
B)uncertainty regarding the availability of technology for widespread adoption
C)uncertainty regarding the impact that future technology will have on costs
D)all of the above

Question 25

When environmental economists and policymakers examine the question of how environmental regulations impact the macro economy

A)they examine the expenditures made throughout the economy for pollution control
B)they employ macro economic modeling to determine the relationship between pollution control expenditures and national economic performance
C)they use bottom up and/or top down methods
D)all of the above

Question 26

One of the critical elements of success for long run technical change and pollution cost controls in all manufacturing industries is the status and health of the

A)government
B)states rights
C)envirotech industry
D)cost accounting systems

Question 27

When an environmental regulation is enacted, firms and/or industries may experience adjustment costs in terms of reduced output.Firms and industries with a ____________ demand curve will experience _____________ adjustments in output.

A)steeper; greater
B)steeper; less
C)flatter; greater
D)flatter; less