Deck 11: Policy Issues: Housing Affordability and Climate Change

Question 1

Climate change is:

A) long-term changes in the world's climate.
B) short-term changes in the world's climate.
C) long-term changes in the local climate.
D) short-term changes in the local climate.

Answer 1

A

Question 2

The absence of the external costs of carbon emissions in the price of electricity means that:

A) firms produce electricity accounting for the global warming.
B) firms produce electricity equal to what is socially desirable.
C) firms produce more electricity than is socially desirable.
D) firms produce less electricity than is socially desirable.

Answer 2

C

Question 3

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-Suppose that firms are required to purchase equipment to reduce carbon emissions. How is this illustrated in Exhibit 10.2?

A) A shift from 'Supply 2' to 'Supply 1'.
B) A movement along the 'Supply 1' curve.
C) A shift in demand.
D) A shift from 'Supply 1' to 'Supply 2'.

Answer 3

A shift from 'Supply 1' to 'Supply 2'.

Question 4

Australian governments have argued that:

A) Australia should not focus on climate change issues as it is a minor issue for Australia.
B) Australia should address the climate change issues even if other countries are unwilling to do so.
C) Australia should address the poverty issues first.
D) Australia should address the climate change issues only when other countries are willing to do the same.

Question 5

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, assume that firms are required to pay tax of $30 per unit of carbon intensive outputs. Further assume that the initial supply curve was 'Supply 1'. What is the socially desirable outcome?

A) 40 units of carbon intensive outputs at the price of $30.
B) 40 units of carbon intensive outputs at the price of $40.
C) 70 units of carbon intensive outputs at the price of $40.
D) 80 units of carbon intensive outputs at the price of $20.

Question 6

An example of a policy that is not designed to reduce the output of the activity creating the negative externality is a:

A) congestion charge.
B) policy that restricts the fishing activity.
C) competition policy.
D) policy that creates property rights.

Question 7

The climate change issue involves:

A) no externalities.
B) neutral externalities.
C) negative externalities.
D) positive externalities.

Question 8

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-Suppose the government imposed a carbon tax to reduce carbon emissions. How is it illustrated in Exhibit 10.2?

A) A shift from 'Supply 2' to 'Supply 1'.
B) A movement along the 'Supply 1' curve.
C) A shift in demand.
D) A shift from 'Supply 1' to 'Supply 2'.

Question 9

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, what is the price of carbon intensive outputs if the supply is 'Supply 1'?

A) $30.
B) $40.
C) $50.
D) $20.

Question 10

Long-term changes in the world's climate are believed to be caused partly by:

A) human activity.
B) natural changes in climate.
C) pre-industrial revolution.
D) governments' policies.

Question 11

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, what is the quantity of carbon intensive outputs if the supply is 'Supply 2'?

A) 60.
B) 40.
C) 20.
D) 80.

Question 12

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, if the external cost is not included in the supply curve 'Supply 1', the market demand and market supply curve 'Supply 1' produce a/an:

A) socially desirable outcome.
B) efficient outcome.
C) inefficient outcome.
D) better outcome than an intersection of market demand and Supply 2.

Question 13

The industry supply curve typically:

A) includes all costs including social costs.
B) does not include the external costs.
C) only includes external costs.
D) includes internal and external costs.

Question 14

The most important contributor to climate change is:

A) carbon dioxide (SO₂).
B) sulphur dioxide (CO₂).
C) carton dioxide (KO₂).
D) carbon dioxide (CO₂).

Question 15

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, what is the quantity of carbon intensive outputs if the supply is 'Supply 1'?

A) 60.
B) 40.
C) 20.
D) 80.

Question 16

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, what is the price of carbon intensive outputs if the supply is 'Supply 2'?

A) $30.
B) $40.
C) $50.
D) $20.

Question 17

If the external costs of carbon emissions were included in the industry supply curve:

A) carbon emitters would use more resources but emit less.
B) carbon emitters would use fewer resources and emit less.
C) carbon emitters would use fewer resources but emit more.
D) carbon emitters would use the same resources but emit less.

Question 18

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, the market demand curve 'Demand' and market supply curve 'Supply 1' establish market equilibrium at:

A) 60 units of carbon intensive outputs at $30 per unit.
B) 40 units of carbon intensive outputs at $30 per unit.
C) 40 units of carbon intensive outputs at $40 per unit.
D) 60 units of carbon intensive outputs at $50 per unit.

Question 19

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, the market demand curve 'Demand' and market supply curve 'Supply 1' establish a:

A) socially desirable level of emissions.
B) market equilibrium.
C) regulated output.
D) price and quantity of external costs.

Question 20

If the external costs of carbon emissions were included in the industry supply curve:

A) the supply curve would shift to the right decreasing the price and increasing the output.
B) the supply curve would shift to the left increasing the price and increasing the output.
C) the supply curve would shift to the left increasing the price and reducing the output level.
D) the supply curve would shift to the right increasing the price and reducing the output.

Question 21

Firms wanting to emit carbon dioxide have to:

A) buy emissions permits.
B) sell emissions permits.
C) stop production.
D) exit the industry.

Question 22

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, which of the following is likely to be true?

A) Equilibrium between the market demand 'Demand' curve and market supply 'Supply' curve indicate the over allocation of resources to carbon intensive activities.
B) Supply curve 'Supply 2' includes the positive externality that is not included in the supply curve 'Supply 1'.
C) If the carbon tax of $30 is imposed, the supply curve 'Supply 1' will shift to the right to supply curve 'Supply 2'.
D) Carbon tax will result in 60 units of carbon intensive outputs at $30 per unit.

Question 23

The recession would cause:

A) an increase in demand, a decrease in industry output, reduced emissions and a reduced demand for emissions permits.
B) a decrease in demand, a decrease in industry output, increased emissions and an increased demand for emissions permits.
C) a decrease in demand, a decrease in industry output, reduced emissions and a reduced demand for emissions permits.
D) a decrease in demand, a decrease in industry output, increased emissions and a reduced demand for emissions permits.

Question 24

The carbon tax has to be set at the ________ level.

A) high
B) correct
C) low
D) fair

Question 25

If the pollution control costs are low but the carbon tax is high, firms are encouraged to:

A) pay the carbon tax.
B) install pollution control equipment.
C) sell their inventories at lower prices.
D) increase production.

Question 26

Carbon tax is:

A) a tax levied as a percentage of the revenue earned by producers.
B) a tax levied per tonne of carbon emitted by producers.
C) a tax levied per tonne of carbon consumed by consumers.
D) a tax levied on the value of carbon emitted by producers.

Question 27

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, which of the following is likely to be true?

A) Carbon emitting firms include the cost of carbon in their market cost (Supply 1).
B) Firms exit the industry if the cost of carbon is not included in their market cost (Supply 1).
C) Tax shifts the 'Supply 2' curve to the right.
D) If firms are required to purchase emissions permits, the supply curve 'Supply 1' will shift to the left to supply curve 'Supply 2'.

Question 28

The emissions trading scheme is often called a:

A) 'less is better' scheme.
B) 'buy and sell' scheme.
C) 'cap and trade' scheme.
D) 'ceiling and cap' scheme.

Question 29

Regulation can encourage firms to:

A) introduce processes that reduce emissions per unit of output more than without
The regulation.
B) increase the output because firms have limited competition.
C) increase emissions as their output declines.
D) adopt emissions intensive technologies.

Question 30

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10.2). What is the reduction in the output after the carbon tax was imposed?

A) zero units.
B) 30 units.
C) 20 units.
D) 10 units.

Question 31

Suppose a new emissions reducing production technology is installed. The price of emissions permits will:

A) increase due to the decrease in demand for permits.
B) reduce due to the increase in demand for permits.
C) increase due to the increase in demand for permits.
D) reduce due to the decrease in demand for permits.

Question 32

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2' (Exhibit 10.2). What is the level of carbon tax imposed?

A) $10.
B) $30.
C) $40.
D) $20.

Question 33

Which of the following statements is true?

A) The reduced demand for permits would increase their price.
B) The reduced demand for permits would shift the industry supply curve for carbon intensive output to the left.
C) The increased demand for permits would increase firms' costs and shift the supply curve for carbon intensive outputs to the left.
D) The reduced demand for permits would lower their price, lower firms' costs, and shift the industry supply curve for carbon intensive outputs to the right.

Question 34

Which of the following statements is true?

A) A 'cap and trade' scheme is beneficial to consumers because more goods are produced.
B) A new emissions reducing production technology will increase the price of emissions permits.
C) A 'cap and trade' scheme has a fixed price for emissions permits.
D) A decrease in demand for permits reduces the equilibrium price of permits.

Question 35

Emissions trading scheme is:

A) a scheme involving trading in emissions (tonnes).
B) the scheme adopted by Barack Obama.
C) a part of game theory looking at interactions of the polluters and consumers.
D) a government scheme requiring emitters to buy emissions permits.

Question 36

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-In Exhibit 10.2, which of the following is likely to be true? Assume that the private supply is 'Supply 1' and the supply including carbon tax is 'Supply 2'.

A) Global warming is not a local problem and firms should not be taxed.
B) Since the discharge of the carbon dioxide in the atmosphere increased health care costs, the policy measures should be adopted to shift the supply curve 'Supply 1' to the left ('Supply 2').
C) The carbon tax will increase the price from $30 to $60 per unit.
D) The demand is negatively related to the supply.

Question 37

The Carbon Pollution Reduction Scheme (CPRS) was authored by:

A) Kevin Rudd.
B) Barack Obama.
C) Bill Clinton.
D) Ross Garnaut.

Question 38

The upper limit to allowable emissions is called:

A) cap.
B) ceiling.
C) unacceptable level of emissions.
D) lowest level of emissions.

Question 39

The revenue from the carbon tax:

A) could be used to fund more hospitals.
B) could be used to fully compensate those damaged by the pollution.
C) could be used to fully compensate those who are paying the carbon tax.
D) could be used to make industries more competitive internationally.

Question 40

Narrbegin Exhibit 10.2 Carbon emissions as an externality

-Assume that the private supply is 'Supply 1' and the supply including tax is 'Supply 2' (Exhibit 10.2). What is the price increase (at the equilibrium level) after the carbon tax was imposed?

A) $10.
B) $30.
C) $40.
D) $20.

Question 41

Narrbegin Exhibit 10.3 Price and demand for permits data
$$\begin{array} { |c | c |} \hline \text { Price } & \text { Quantity } \\\hline 10 & 110 \\\hline 20 & 100 \\\hline 30 & 90 \\\hline 40 & 80 \\\hline 50 & 70 \\\hline 60 & 60\\\hline\end{array}$$ Narrend

-In Exhibit 10.3, if the 'cap' is set at 80 permits, and the demand for the permits decreased by 10 units at each price level, the resulting price of permits is equal to:

A) $50.
B) $30.
C) $10.
D) $40

Question 42

Narrbegin Exhibit 10.3 Price and demand for permits data
$$\begin{array} { |c | c |} \hline \text { Price } & \text { Quantity } \\\hline 10 & 110 \\\hline 20 & 100 \\\hline 30 & 90 \\\hline 40 & 80 \\\hline 50 & 70 \\\hline 60 & 60\\\hline\end{array}$$ Narrend

-In Exhibit 10.3, if the 'cap' is set at 80 permits, the resulting market price of permits is:

A) $60.
B) $30.
C) $40.
D) $10.

Question 43

Under the emissions trading scheme, if lots of firms introduce emissions curbing technologies, the demand for permits:

A) might increase and their price fall.
B) might decrease and their price rise.
C) might increase and their price rise.
D) might decrease and their prices fall too.

Question 44

Which of the following is not a policy solution to reduce emissions?

A) Carbon tax.
B) Regulation of Carbon Emissions.
C) Emissions trading Permit.
D) Income tax.

Question 45

Under the emissions trading scheme, if lots of firms introduce emissions curbing technologies, the demand for permits:

A) might decrease and the firms' costs fall, while industry will expand, but the emissions will stay under the allowed cap.
B) might increase and their price fall increasing the costs to firms.
C) might decrease and their price rise leading to reduced output by the industry.
D) might increase and their price rise, resulting in lower costs to the firms and increased output by the industry.

Question 46

Carbon tax solution provides:

A) a similar outcome to that of government regulation.
B) a similar outcome to that of a standard.
C) a more efficient outcome than that of a 'cap and trade' scheme.
D) a similar outcome to that of a 'cap and trade' scheme.

Question 47

A New South Wales government subsidised the installation of household solar rooftop generators at the cost of:

A) $520-$640 per household.
B) $52-$64 per tonne of carbon reduced.
C) $20-$40 per tonne of carbon reduced.
D) $520-$640 per tonne of carbon reduced.

Question 48

Once the carbon trading scheme is in place:

A) the price/output adjustments will be possible without the intervention of the government.
B) the government will need to regulate the price or output.
C) the price/output adjustments will be impossible without the intervention of the
Government.
D) the price will be adjusted easily by the market but the output adjustments have to be done by the government.

Question 49

Economists prefer an emissions trading scheme to other carbon reduction measures because:

A) an ETS requires continuous government intervention.
B) such a scheme achieves the highest emissions reduction price per tonne of carbon.
C) such a scheme gives all parties involved more flexibility and more control over their own decisions.
D) they don't trust government to make the right decisions.

Question 50

An emissions trading scheme requires:

A) constant government intervention.
B) the prices of the permits to be approved by the government on an individual basis.
C) specific technologies nominated by government to be installed to reduce emissions.
D) minimal government intervention.

Question 51

Which of the following is not supported by economists to combat the problem of climate change?

A) Carbon tax to reduce emissions.
B) Emissions trading scheme.
C) 'Cap and trade' scheme.
D) Do nothing and solely rely on market based outcome.

Question 52

The estimates of prices for a permit to emit one tonne of carbon followed by the introduction of a 'cap and trade' scheme have been:

A) less than $50 per tonne of carbon reduced.
B) less than $500 per tonne of carbon reduced.
C) less than $50 per household.
D) less than $5 per tonne of carbon reduced.

Question 53

The emissions trading scheme is preferred by economists because:

A) clean air is not like any other scarce resource and cannot be traded on the market.
B) it treats the clean air as a limited economic resource which is owned by consumers and firms have to pay to use it.
C) once the trading scheme is in place, the firms have no control over how to minimise their losses.
D) it is up to the firms to decide on how much emissions they can produce.

Question 54

Economists prefer:

A) the emissions trading over regulation.
B) the emissions trading with regulation.
C) regulation over the emissions trading.
D) regulation over the carbon tax.

Question 55

Economists prefer:

A) regulation to solve the problem of emissions.
B) emissions trading schemes to market regulation.
C) the political agenda to control the level of emissions.
D) government to prescribe the technology to be used for emissions reduction.

Question 56

Narrbegin Exhibit 10.3 Price and demand for permits data
$$\begin{array} { |c | c |} \hline \text { Price } & \text { Quantity } \\\hline 10 & 110 \\\hline 20 & 100 \\\hline 30 & 90 \\\hline 40 & 80 \\\hline 50 & 70 \\\hline 60 & 60\\\hline\end{array}$$ Narrend

-In Exhibit 10.3, if the 'cap' is set at 100 permits, the resulting market price of permits is:

A) $50.
B) $10.
C) $100.
D) $20.

Question 57

Narrbegin Exhibit 10.3 Price and demand for permits data
$$\begin{array} { |c | c |} \hline \text { Price } & \text { Quantity } \\\hline 10 & 110 \\\hline 20 & 100 \\\hline 30 & 90 \\\hline 40 & 80 \\\hline 50 & 70 \\\hline 60 & 60\\\hline\end{array}$$ Narrend

-In Exhibit 10.3, if the 'cap' is set at 80 permits, and the demand for the permits decreased by 20 units at each price level, the resulting price of permits is equal to:

A) $50.
B) $30.
C) $10.
D) $20

Question 58

Which of the following is true?

A) Regulation is a superior method of emissions reduction because it can be controlled by the government.
B) Once the property rights are assigned, the carbon tax regime will adjust the private costs to the full social costs and the perfect market equilibrium will be achieved.
C) Once the correct property rights are assigned and the market is competitive, the emissions trading scheme will achieve the socially desirable outcome.
D) The property rights accompanied by regulation are superior policy solutions because the government knows the best solution for emissions reduction.

Question 59

One of the criticisms of the tax is that:

A) there is an immediate reaction by the government to reduce or increase the tax.
B) there is a time lag between the changes in the economy and the introduction of new technologies.
C) the tax can be altered instantly to maintain the necessary level of emissions.
D) the level of emissions is too high compared to the level of emissions without the tax.

Question 60

Subsidisation of clean energy production is often achieved through a/an:

A) Emissions Trading Scheme (ETS).
B) Green Energy Certificates (GECs) scheme.
C) Renewable Energy Certificates (RECs) scheme.
D) Clean Energy Certificates (CESs) scheme.

Question 61

Narrbegin Exhibit 10.4 The market for permits

-If the cap in Exhibit 10.4 increased to 50 permits, the resulting price given 'Demand 1' will be:

A) $20.
B) $30.
C) $40.
D) $50.

Question 62

Narrbegin Exhibit 10.4 The market for permits

-In Exhibit 10.4, if the demand for permits is 'Demand 2', the price of permits is equal to:

A) $50.
B) $30.
C) $20.
D) $10.

Question 63

The climate change problem involves:

A) international participation, the positive externality and various policy options.
B) international participation, the negative externality and only one policy option such as carbon tax.
C) international participation, the negative externality and only voluntary agreements among producers.
D) international participation, the negative externality and various policy options.

Question 64

Once the social cost of emissions is included in the price, the firms will reduce their production and will charge a higher price.

Question 65

Narrbegin Exhibit 10.4 The market for permits

-Looking at Exhibit 10.4, suppose that there is a slowdown in the economy. That might lead to:

A) an increase in demand for carbon intensive outputs.
B) a decrease in demand for carbon production.
C) an increase in demand for emissions.
D) a decrease in demand for carbon intensive outputs.

Question 66

Chapter 10 of the textbook refers to 'ETS' as:

A) Enterprise Technology Services
B) Energy Transfer System.
C) Edmonton Transit System.
D) Emissions Trading Scheme.

Question 67

An alternative approach to carbon tax is:

A) resource super profits tax.
B) income tax.
C) exchange.
D) Carban emissions trading scheme.

Question 68

The objective of the carbon tax is to encourage more production using carbon intensive technologies.

Question 69

Narrbegin Exhibit 10.4 The market for permits

-In Exhibit 10.4, a decrease in demand for permits can be due to:

A) an economic boom.
B) a new emissions reduction technology.
C) a new technology that increases emissions.
D) an increase in industry output.

Question 70

If the carbon tax is imposed in order to reduce the emissions, it will:

A) increase the quantity of carbon intensive outputs.
B) shift the demand for carbon intensive outputs to the right.
C) have no impact on the quantity of carbon intensive outputs.
D) lower the quantity of carbon intensive outputs.

Question 71

Narrbegin Exhibit 10.4 The market for permits

-In Exhibit 10.4, if the demand for permits is 'Demand 1', the price of permits is equal to:

A) $50.
B) $30.
C) $20.
D) $10.

Question 72

Emissions trading schemes require government to set the appropriate level of carbon tax.

Question 73

Narrbegin Exhibit 10.4 The market for permits

-In Exhibit 10.4, suppose that there is a slowdown in the economy. That is illustrated by:

A) a shift from 'Demand 1' to 'Cap'.
B) a shift from 'Demand 2' to 'Demand 1'.
C) a shift from 'Demand 1' to 'Demand 2'.
D) a shift from 'Cap' to 'Demand 2'.

Question 74

Carbon tax was introduced in 2011 by the Gillard government and abolished in 2014 by the Abbott government.

Question 75

The external cost of carbon emissions is not included in the market supply curve of private firms.

Question 76

The carbon tax can be introduced when:

A) society has a low liability cost of pollution.
B) the external cost of production is not accounted for in the market prices.
C) the government decides to reduce spending on rail and road infrastructure.
D) producers adopt emissions reduction technologies.

Question 77

If negative externality is included in the price, we would expect:

A) the increase in production and the increase in price.
B) the reduction in production and the decrease in price.
C) the reduction in production and the increase in price.
D) the reduction in production and no change in price.

Question 78

Regulation is the best solution to climate change issues.

Question 79

Which of the following is true?

A) There is only one useful policy to deal with the climate change: the carbon tax.
B) The Australian government has argued that Australia should not deal with the climate change problem.
C) Climate change is a problem that can be solved by one country alone.
D) There is no international consensus on how to deal with the climate change problem.