Deck 19: Economics of Energy, the Environment, and Global Climate Change Glossary

Question 1

Which of the following best describes "the value of a statistical life"?

A) The monetary value treated as the cost of an additional death from pollution.
B) The price society would pay, on average, to avoid a certain death.
C) The total monetary value of a person's current income and expected future income.
D) The cost to society of an average person's lifetime consumption.

Answer 1

B
Explanation: The value of a statistical life is the price society would pay, on average, to avoid a certain death.

Question 2

Concerns about running out of oil are legitimate because it has been several decades since oil companies have found new oil fields.

Answer 2

False
Explanation: Oil companies keep finding new oil fields, which has made concerns about running out of oil, which first began in 1973, largely overstated.

Question 3

The "peak oil" argument states that the amount of oil available each year to the world economy at any given price will fall,shifting the supply curve to the left.

Answer 3

True
Explanation: The large oil fields in the Middle East may be less productive than expected, reducing the amount of oil available and forcing a significant increase in the price of oil.

Question 4

To estimate the value of a statistical life,economists sometimes ask people how much they would be willing to pay to reduce their risk of death by a small amount.This method of determining the value of a statistical life is known as

A) revealed preference.
B) stated preference.
C) the actuarial method.
D) the survey method.

Question 5

When electricity buyers and electric utility companies trade with one another,the electric utilities may generate electricity with a coal-burning power plant.This produces sulfur dioxide,nitrogen dioxide,particulates,and other air pollutants,which affect people who may not be among the buyers or sellers.This phenomenon is known as

A) a negative externality.
B) excess supply.
C) resource overuse.
D) mitigation.

Question 6

Wealthier countries tend to consume less energy than poorer countries because wealthier countries can afford energy-efficient technologies.

Question 7

Which of the following would shift the demand for gasoline to the left?

A) An excise tax levied on sellers of gasoline.
B) New regulatory restrictions on the construction of new oil refineries.
C) A national speed limit maximum set below existing state speed limits.
D) An increase in the marginal cost of extracting oil from large reserves in the Middle East.

Question 8

Over the last century and a half,per capita energy use in the United States has more than tripled,with most of the increases occurring in the last 30 years.

Question 9

Which of the following will occur if the supply curve for gasoline shifts to the left?

A) The demand for gasoline will shift to the left as people demand less gasoline.
B) The price of gasoline will rise, and the quantity demanded will fall.
C) The price of gasoline will fall, and the quantity demanded will rise.
D) Nothing will happen to the quantity of gasoline used because people are addicted to gasoline.

Question 10

An externality is a side effect from an exchange that affects someone other than the buyer and seller.

Question 11

Windmills are an alternative energy source that creates no negative externalities.

Question 12

Suppose air pollution creates a haze that obscures a previously clear view of a distant mountain range.This effect of pollution would be called

A) a health impact.
B) material and crop damage.
C) harm to environmental amenities.
D) ecological damage.

Question 13

Renewable energy sources,such as solar,hydro,and wind power,make up about half of all energy production in the world today.

Question 14

Energy conservation is a shift in economic activities to make the use of energy less costly.

Question 15

To estimate the value of a statistical life,economists sometimes look at the decisions that people make that will change their risk of death.For example,people may accept a more dangerous job in exchange for higher pay.This method of determining the value of a statistical life is known as

A) revealed preference.
B) stated preference.
C) the actuarial method.
D) the trade-off method.

Question 16

Which of the following is a good example of a negative externality?

A) A forest that absorbs carbon dioxide and generates oxygen.
B) A landfill that creates undesirable odors on surrounding property.
C) A "big box" retail store that outcompetes existing retail stores.
D) A rose garden in your front yard.

Question 17

A majority of the world's energy supply today comes from fossil fuels,such as coal,oil,and natural gas.

Question 18

The United States consumes more energy per person than any other country in the world.

Question 19

What effect would an excise tax on gasoline have on the market for gasoline?

A) The quantity supplied would fall, and the quantity demanded would rise.
B) The after-tax price of gasoline would fall as sellers lower prices to compensate buyers.
C) The demand curve for gasoline would shift to the right.
D) The after-tax price received by the seller would be lower than the price before the tax.

Question 20

Which of the following is NOT a negative externality?

A) A homeowner failing to remove trash from his yard, leaving it as an unsightly eyesore in the neighborhood.
B) Low-flying aircraft creating noise over an otherwise quiet neighborhood.
C) A household pet leaving waste on a public sidewalk.
D) E-mail "spam" consisting of advertisements for goods and services.

Question 21

In 1972,the EPA banned the pesticide DDT.How would you classify this approach to reducing the environmental contamination caused by DDT?

A) A marketable permit system.
B) A cap-and-trade system.
C) A carbon tax.
D) Command-and-control regulation.

Question 22

One of the characteristics of the cap-and-trade system is that

A) there is no way to ensure that pollution is reduced below some allowable total amount.
B) it is inflexible, and does not respond well to differences in the marginal cost of pollution reduction.
C) it is more expensive than a command-and-control system.
D) it reduces the economic damage that would have been done by a command-and-control system.

Question 23

Responses to global climate change include the alteration of consumer and business behavior to reduce any damage that might occur from global climate change.This is called

A) mitigation.
B) a carbon tax.
C) adaptation.
D) revealed preference systems.

Question 24

If the government sells certificates giving the owner permission to emit a particular amount of pollution,and then allows these certificates to be bought and sold at a market price,then the government is using a market-based approach to pollution reduction called

A) tradable pollution permits.
B) command-and-control regulation.
C) a carbon tax.
D) mitigation.

Question 25

Controlling pollution by setting the same maximum allowable amount of pollution for each polluter,and making specific rules about the way it must be reduced,is called

A) the common-law approach.
B) tax-and-fine regulation.
C) cap-and-trade regulation.
D) command-and-control regulation.

Question 26

If the true social marginal cost of producing a product,including the externality,is higher than the marginal cost to the producer alone,then which of the following must be true?

A) The production of the product generates a positive externality.
B) The production of the product is too small compared to the ideal amount.
C) The price of the product is too high compared to what would be socially ideal.
D) The production of the product generates a negative externality.

Question 27

A tax on different kinds of fuels based on their carbon content is called a

A) mitigation tax.
B) BTU tax.
C) carbon tax.
D) fossil fuel tax.

Question 28

Which of the following is a market-based approach to controlling pollution?

A) Government sales of tradable allowances to emit sulfur dioxide up to a certain maximum.
B) A law requiring auto manufacturers to install catalytic converters to reduce carbon monoxide emissions below a certain level.
C) A rule requiring municipalities to limit the amount of atrazine in their water supplies to one part per billion.
D) A regulation banning the use of lead-based solder in household plumbing.

Question 29

Which of the following is a type of command-and-control regulation?

A) A law setting the maximum allowable amount of sulfur dioxide (SO₂) in a certain district, and auctioning off permits totaling the allowable tons of SO₂.
B) A law requiring coke ovens to be built in a certain way so as to restrict the amount of pollution they emit.
C) A law taxing users of fuels according to the carbon content in the fuel.
D) A law requiring consumers of electronics to pay a tax according to the amount of toxic heavy metals in each item purchased.

Question 30

One of the characteristics of a carbon tax is that it would

A) encourage energy consumers to invest in energy efficiency.
B) place the heaviest burden on high-income families.
C) tend to encourage more usage of cheaper fuels like coal and less usage of expensive energy sources like nuclear energy.
D) have little effect on the emission of greenhouse gases.

Question 31

Among the characteristics of the command-and-control approach to pollution reduction is that it is

A) less costly than cap-and-trade systems.
B) easily adjusted to changes in marginal costs of pollution reduction across firms.
C) typically inflexible and thus quite expensive.
D) less costly than a carbon tax.

Question 32

Which of the following statements is true?

A) If a buyer ends up being worse off from an exchange rather than better off as expected, this is a negative externality.
B) Secondhand cigarette smoke is an example of a negative externality.
C) As long as the benefits to society from an exchange outweigh the costs to society, no negative externality has occurred.
D) As long as the benefits to society from an exchange outweigh the costs to the producer of the good or service, no negative externality has occurred.

Question 33

Which of the following is the most widely used energy source in the world?

A) Nuclear energy.
B) Hydroelectric energy.
C) Fossil fuels.
D) Wind power.

Question 34

Which of the following companies would benefit the most from a carbon tax?

A) An oil company.
B) A coal mining equipment manufacturer.
C) A producer of windmill turbines.
D) A trucking company.

Question 35

If the marginal cost curve for paper production were altered to reflect the cost of the odor imposed on surrounding areas,which of the following would occur?

A) The marginal cost curve would shift downward.
B) The market price, accounting for the externality, would rise.
C) It would become socially efficient to produce more paper.
D) The market price would fall.

Question 36

Suppose the production of widgets generates negative externalities but no positive externalities.If widget producers suddenly had to pay the true marginal cost of their product for every unit they produced,including all externalities,producers would

A) produce more than the current level of output.
B) produce and sell at a lower price than before.
C) produce less than the current level of output.
D) have less of an incentive to control their pollution output.

Question 37

Which of the following statements about the burden of a carbon tax is true?

A) A carbon tax is progressive, placing a relatively heavy burden on high-income households.
B) A carbon tax is regressive, placing a relatively heavy burden on poor households.
C) A carbon tax is proportional, placing about the same burden on high- and low-income households.
D) The burden of a carbon tax would fall entirely on fossil fuel-burning energy producers and their stockholders, employees, and suppliers, and would not affect consumers.

Question 38

Which of the following is considered a "nonrenewable" energy source?

A) Windmills.
B) Hydroelectric power.
C) Natural gas.
D) Cellulosic fuel (e.g., wood).

Question 39

Adjusting GDP downward for the impact industry has on the environment results in a number that is greatly disputed,but is often referred to as

A) "eco-output."
B) "environment-neutral GDP."
C) "resource-adjusted GDP."
D) "green GDP."

Question 40

Negative externalities resulting from a coal-fired power plant would include

A) emissions of sulfur dioxide, a chemical that causes acid rain.
B) creation of lower-cost electricity, which makes it more difficult for high-cost electricity producers like solar or wind power generators to make a profit.
C) Profits to people other than the consumers of the electricity, such as stockholders in the electric utility company.
D) illumination of cities, reducing crime rates and accidents from better lighting of streets and other public places.

Question 41

Describe the difference between a command-and-control approach and a market-based approach to reducing pollution.

Question 42

The cost of getting one more ton of coal or one more barrel of oil out of the ground is called the

A) marginal cost of capital.
B) energy renewal rate.
C) marginal cost of extraction.
D) energy mitigation rate.

Question 43

Command-and-control approaches to reducing pollution can be criticized on the grounds that they may be all of the following EXCEPT

A) inflexible.
B) politically unpopular.
C) overly expensive.
D) counterproductive.

Question 44

Which of the following would occur if the marginal cost of extracting oil rose?

A) People would use less oil.
B) People would use more oil.
C) Oil producers would increase their production of oil.
D) Oil company profits would rise.

Question 45

Which of these attempts at promoting energy conservation would shift the demand curve for energy to the left?

A) A higher tax on gasoline.
B) A tougher fuel efficiency standard for cars.
C) A reduction in the amount of available oil.
D) A higher average speed limit.

Question 46

In 2010,Exxon Mobil,the world's largest oil company,spent $32 billion on

A) payments to people affected by oil spills.
B) defending itself against class-action lawsuits.
C) exploration and capital investment.
D) executive compensation.

Question 47

If the cost of the negative pollution externality was added to the marginal cost of production,the true cost curve would be

A) to the right of the marginal cost curve for production only.
B) above the marginal cost curve for production only.
C) steeper than the marginal cost curve for production only.
D) vertical.

Question 48

Suppose the government auctions off permits to car and truck owners,with each permit allowing the user to emit five tons of carbon dioxide each year from his or her vehicle.The total amount of carbon dioxide permitted is less than the amount currently emitted by vehicles.These permits could then be bought and sold on a market.Which of the following is the best term for this type of system?

A) A price-based adaptation system.
B) A cap-and-trade system.
C) A mitigation allowance.
D) A command-and-control system.

Question 49

One example of the health damage that can be caused by pollution is

A) the harm to agriculture.
B) the reduction in enjoyment from damaged environmental amenities.
C) a greater incidence of asthma due to air pollution.
D) damage to a functioning ecosystem.

Question 50

Suppose the government auctions off permits to car and truck owners,with each permit allowing the user to emit five tons of carbon dioxide each year from her or his vehicle.The total amount of carbon dioxide permitted is less than the amount currently emitted by vehicles.These permits could then be bought and sold on a market.Which of the following would occur?

A) Wealthy people would bear a larger burden under this system, relative to their incomes.
B) The total amount of fossil fuels burned in vehicles would actually increase.
C) People would pay less attention to their vehicle emissions than they do now because they could simply buy a permit and emit more.
D) People would tend to purchase cars that emitted less carbon dioxide.

Question 51

Greenhouse gases arise from

A) the combustion of carbon-based fossil fuels.
B) the chemicals that are used in agriculture.
C) the use of toxic household cleansers.
D) rising global temperatures.

Question 52

Briefly describe revealed preference and stated preference as means of determining the value of a statistical life.

Question 53

As of 2010,the Environmental Protection Agency considers $7.9 million to be the

A) value of a statistical life.
B) true value of any human life.
C) daily cost of cleaning up water pollution.
D) total economic value of clean air regulations.

Question 54

Describe the two main categories of responses to global climate change.

Question 55

Which of the following is NOT a reason why Japanese per capita energy consumption is significantly lower than American per capita energy consumption?

A) Japanese homes tend to be smaller.
B) Japanese homes are more likely to have energy-efficient appliances.
C) Japanese consumers pay hefty fees for overuse of energy.
D) Japan is a smaller country, so less travel is required.

Question 56

In some ways,adaptation is similar to

A) mitigation.
B) a cap-and-trade system.
C) the usual demand response to a price change.
D) a supply curve shift.

Question 57

Since the mid-1970s,energy use per person in the United States has

A) doubled.
B) remained more or less stable from year to year.
C) tripled.
D) fallen by 50 percent.

Question 58

The National Maximum Speed Law forced states to keep speed limits at 55 miles per hour from 1974 to 1995 in an attempt to

A) conserve energy.
B) save lives.
C) raise revenues for police departments through traffic fines.
D) reduce the variability of speed limits across states.

Question 59

Which of the following is NOT an example of a negative externality?

A) Damage to homes and businesses caused by a forest fire ignited by lightning.
B) Noise from a neighbor's motorcycle as he prepares to ride to work at 5a.m.
C) Fertilizer on a farmer's field that enters a river and promotes algae growth and kills fish downstream.
D) Secondhand cigarette smoke.

Question 60

The "cap" in cap-and-trade refers to the

A) cap on pollution implied by the limited number of permits issued.
B) captain who oversees the reduction of pollution by businesses.
C) maximum number of pollution permits that any one business may use.
D) name of a specific piece of equipment that is used to reduce air pollution.

Question 61

List and briefly describe the four types of negative impacts from pollution.

Question 62

Suppose the U.S.government imposes a requirement that all passenger cars achieve a minimum fuel economy of 25 miles per gallon combined fuel efficiency.What impact would this have on the price of gasoline? What impact do you think this would have on deaths from traffic accidents?