Deck 6: Externalities in Action- Environmental and Health Externalities

Question 1

By the early 1980s,which statement was TRUE?

A) Total emissions were higher than they were before the Clean Air Act of 1970.
B) Total emissions were lower than they were before the Clean Air Act of 1970.
C) Most emissions were due to the construction of new (post-1970)coal-burning plants.
D) The requirements of the Clean Air Act of 1970 had proven too burdensome.

Answer 1

Total emissions were lower than they were before the Clean Air Act of 1970.

Question 2

The Clean Air Act of 1970 and the 1990 amendments can be judged as a success if the:

A) benefits of the regulations resulted in improved health outcomes.
B) costs of the regulations did not include significant job loss.
C) the benefits of lowering particulate emissions are greater than the net economic costs.
D) regulations result in a reduction in greenhouse gas emissions and acid rain.

Answer 2

the benefits of lowering particulate emissions are greater than the net economic costs.

Question 3

The Clean Air Act of 1970 was intended to reduce the emissions that cause acid rain by:

A) setting standards for new coal-fired power plants.
B) setting standards for existing coal-fired power plants.
C) imposing a tax on energy produced by coal-fired power plants.
D) requiring that existing coal-fired power plants install scrubbers.

Answer 3

setting standards for new coal-fired power plants.

Question 4

The 1997 global meeting on climate change in Kyoto,Japan,addressed:

A) acid rain only.
B) global warming only.
C) neither acid rain nor global warming.
D) both acid rain and global warming.

Question 5

Acid rain is caused when _______ are released into the atmosphere.

A) sulfur dioxide and carbon dioxide
B) carbon monoxide and nitrogen oxides
C) sulfur dioxide and nitrogen oxides
D) carbon monoxide and carbon dioxide

Question 6

Which of the following is DIRECTLY caused by acid rain?

A) damage to property
B) reduced visibility
C) adverse health outcomes
D) climate change

Question 7

The 1990 amendments to the Clean Air Act included a regulation that mandated:

A) significant reductions in sulfur dioxide emissions by all plants,even older ones.
B) significant reductions in sulfur dioxide emissions by newly constructed plants only.
C) replacement of all older power plants with new plants utilizing cleaner technology.
D) no further reductions in sulfur dioxide emissions since the goals established in 1970 had been achieved.

Question 8

Acid rain is an example of a classic:

A) positive production externality.
B) positive consumption externality.
C) negative production externality.
D) negative consumption externality.

Question 9

When sulfur dioxide is released into the atmosphere,it combines with hydrogen to form sulfuric acid,also known as particulates.The health costs associated with these particulates:

A) can be observed by comparing outcomes in areas with high levels to outcomes in areas with low levels of particulates.
B) is not significant because economic costs relate only to property damage.
C) cannot be estimated because there is no way to determine the cause of differential health outcomes.
D) can best be estimated based on quasi-experiments with treatment and control groups.

Question 10

Which statement gives an unintended consequence of the 1970 Clean Air Act?

A) Utilities relocated large numbers of power plants to Mexico.
B) Utilities began operating more nuclear power plants.
C) Utilities ran plants built prior to 1970 longer than they would have otherwise.
D) The coal mining industry suffered massive job losses.

Question 11

The Clean Air Act of 1970 forced utilities to:

A) install scrubbers on power plants built before 1970 or switch to low-sulfur coal.
B) install scrubbers on power plants built after 1970 or switch to low-sulfur coal.
C) relocate large numbers of power plants to Mexico.
D) immediately replace older,dirtier power plants with new plants equipped with scrubbers.

Question 12

Which of the following can be said about the Obama administration's 2012 regulation related to greenhouse gas emissions?

A) Most coal-fired power plants easily meet the new carbon standards.
B) The regulation restricts carbon emission for only coal producers.
C) Most natural gas-powered plants easily meet the new carbon standards.
D) Recent studies suggest short-term reduction of carbon emissions of up to 80%.

Question 13

The negative externality that could potentially cause the most harm to humans is:

A) the greenhouse effect,which allows sunlight to enter the atmosphere and traps the heat.
B) the increase in the magnitude of the greenhouse effect and the resulting changes in the earth's climate.
C) increased acidity of lakes and streams caused by emissions of sulfur dioxide and nitrogen oxides.
D) the corrosion of metals and deterioration of stone caused by acid rain.

Question 14

The goal of the 1997 Kyoto treaty was to combat global warming by:

A) cutting greenhouse emissions below 1970 levels by 2010.
B) cutting greenhouse emissions below 1990 levels by 2010.
C) relocating coal-fired power plants to areas of the planet with the highest concentrations of greenhouse gases.
D) relocating coal-fired power plants to areas of the planet with the lowest concentrations of greenhouse gases.

Question 15

The Obama administration's Clean Power Plan calls for:

A) reductions in carbon dioxide emissions from newly constructed power plants only.
B) reductions in carbon dioxide emissions from existing power plants.
C) uniform reductions in every state,regardless of differences across states.
D) closing all coal-fired power plants by the year 2030.

Question 16

In their comparison of health outcomes between communities in attainment areas and those in nonattainment areas before and after the Clean Air Act of 1970,Chay and Greenstone (2003)used a:

A) time series analysis.
B) cross-sectional regression analysis.
C) randomized trial.
D) quasi-experiment.

Question 17

Chay and Greenstone (2003)estimated the effect of the Clean Air Act of 1970 by comparing the health outcomes of people in attainment areas with those of people in nonattainment areas both before and after the law was passed.What did they find?

A) Reduced emissions led to a decrease in infant mortality.
B) Reduced emissions did not affect infant mortality.
C) The Clean Air Act of 1970 did not affect emissions in any states.
D) The Clean Air Act of 1970 affected different regions of the country in the same way.

Question 18

The problem addressed by the 1997 Kyoto treaty was getting _________ in 1997; the problem addressed by the Montreal Protocol of 1987 was getting _________ in 1987.

A) better quickly; better slowly
B) better slowly; worse quickly
C) worse quickly; worse slowly
D) worse slowly; worse quickly

Question 19

Which of statement is accurate regarding the effect of amendments passed to the Clean Air Act in 1990?

A) The amendments encouraged utilities to operate older power plants longer than they would have otherwise.
B) The amendments had little effect on emissions overall,although they did affect local areas.
C) Tradable emissions permit systems work well in practice.
D) Tradable emissions permit systems do not work well in practice.

Question 20

Which statement gives a reason for opposition to the 1990 amendments to the Clean Air Act?

A) An industry study conducted in 1989 predicted the loss of up to 4 million jobs.
B) The nuclear power plants that would be built as a result were unwanted in most communities.
C) The changes did not allow older plants to purchase emission allowances from newer plants.
D) Environmentalists favored an allowance and trading system.

Question 21

Suppose smoking increases health care costs in a society in which everyone has health insurance.If smokers are charged higher prices for health insurance,the smoking externality is:

A) internalized through actuarial adjustments.
B) internalized through compensating differentials.
C) positive instead of negative.
D) not internalized.

Question 22

Which of statement implies that smoking causes a positive externality?

A) Employers lower all wages to account for less productive workers.
B) Smokers die too early to collect Social Security benefits.
C) Insurance companies adjust insurance premiums for smoking status.
D) Income earned by smokers is reduced because they tend to be less productive.

Question 23

In the fall of 2014,a landmark agreement to slow emissions growth was reached between:

A) China and the United States.
B) Russia and China.
C) Russia and the United States.
D) all industrialized countries with the exception of the United States.

Question 24

Scientists discovered a hole opening up in the ozone layer in the 1980s.As a result,the international community adopted the _____ in September of 1987.

A) Kyoto Treaty
B) Clean Air Act
C) Montreal Protocol
D) Antarctica Accord

Question 25

The damage a person does to himself or herself through adverse health (or other)behavior is referred to as:

A) an actuarial adjustment.
B) an externality.
C) an internality.
D) a self-control problem.

Question 26

According to economists Becker and Murphy (1998),"rational" addicts:

A) do not take into account the potential costs associated with smoking.
B) are not capable of making rational choices,so government action is needed.
C) do not understand that smoking today increases their addiction in the future.
D) understand that smoking today increases their addiction in the future.

Question 27

If smokers are less productive in the workplace and the law were to prohibit differential pay on the basis of smoking behavior,then smoking would:

A) cause a positive externality.
B) cause a negative externality.
C) not cause an externality.
D) internalize the externality.

Question 28

Currently,what proportion of Americans smoke?

A) less than 3%
B) approximately 10%
C) nearly 20%
D) more than 30%

Question 29

Which country was the top fossil fuel carbon dioxide emitter in 2012?

A) United States
B) Russia
C) Germany
D) China

Question 30

Under the 1997 Kyoto treaty,the industrialized signatories:

A) are not allowed to trade emissions rights.
B) are allowed to trade emissions rights among themselves,provided emissions goals are achieved.
C) must reduce emissions in the least cost-effective way,leading most industrialized countries to refuse to sign the treaty.
D) must reduce emissions only when it is cost-effective,resulting in participation by countries like the United States.

Question 31

In the standard utility maximization model,smoking is a result of:

A) irrational choice.
B) a miscalculation of the benefits and costs of smoking.
C) rational choice.
D) perfect information about the costs of smoking.

Question 32

The fastest growing public health problem in the United States today is:

A) drug-related accidents.
B) diabetes,which is linked to rising obesity rates.
C) sexually transmitted diseases.
D) smoking-related diseases.

Question 33

Which statement implies that smoking causes a negative externality?

A) Employers lower all wages to account for less productive workers.
B) Smokers die too early to collect Social Security benefits.
C) Insurance companies adjust insurance premiums for smoking status.
D) Income earned by smokers is reduced because they tend to be less productive.

Question 34

Which statement implies that smoking does NOT cause a negative externality?

A) The health costs of the uninsured are passed on to others.
B) Secondhand smoke has serious effects not considered by smokers when they decide to smoke.
C) Fire damages nonsmokers' property and smokers are more likely to start fires.
D) Since smokers die early,they won't have high nursing home costs.

Question 35

Which of the following is a finding of the empirical evidence on raising the legal drinking age to 21?

A) Lowering the drinking age led to 6% to 17% less drinking among 18- to 20-year-olds.
B) Those who start drinking earlier are less likely to drink later in life.
C) Lower drinking ages are associated with a 17% increase in the rate of motor vehicle deaths for 18- to 20-year-olds.
D) Lowering the drinking age has no adverse effects on those aged 18 to 20.

Question 36

The fact that 80% of smokers wish to quit but fewer than the 80% quit is potentially evidence of a:

A) compensating differential.
B) commitment device.
C) financial externality.
D) self-control problem.

Question 37

Making a $200 bet that you will quit smoking by the end of the month is evidence of:

A) an actuarial adjustment.
B) a commitment device.
C) a financial externality.
D) a self-control problem.

Question 38

Global warming is primarily caused by an increase in what gas?

A) carbon monoxide
B) nitric oxide
C) sulfur dioxide
D) carbon dioxide

Question 39

The American Clean Energy and Security Act (2009),which set a target of reducing carbon emissions,was:

A) approved by both the House of Representatives and the Senate,but not by the President.
B) approved by the House of Representatives,but did not have enough support in the Senate.
C) passed by Congress and signed into law by the President.
D) passed by Congress but vetoed by the President.

Question 40

The central estimate for the ____________ due to smoking (excluding secondhand smoke)are ___________ the level of taxation.

A) externalities; greater than
B) externalities; less than
C) internalities; greater than
D) internalities; less than

Question 41

In recent years,there have been a number of different approaches using public policy tools to reduce obesity.Summarize at least three of these new approaches.

Question 42

Discuss the difference between the problem of global warming and the problem of ozone depletion,including how these differences have affected resolutions to the underlying problems.

Question 43

If all the effects of secondhand smoke occurred among a person's family in his or her home,is there any alternative to a public sector approach of taxes,subsidies,or regulation to resolving this externality? Explain.

Question 44

Evaluate the success of the Clean Air Act (CAA)of 1970 and the 1990 amendments.What are the important issues that should be considered in order to analyze these regulations accurately?

Question 45

How might the externality of smoking be different in a state in which unions negotiate common wages for all employees in similar positions in a company versus a state in which there are no labor unions and wages are negotiated by each employee? Assume that all other aspects of these two states are identical.

Question 46

A grandfather clause in a regulation typically exempts existing facilities or operations from the new regulation.For example,the Clean Air Act of 1970 exempted existing plants from the regulation,affecting only new plants.What was the rationale for including a grandfather clause in something like the Clean Air Act of 1970? Describe a negative result of the grandfather clause used in the 1970 act?

Question 47

Public policy approaches designed to reduce obesity:

A) have not been proposed,but hold a lot of promise.
B) have been highly effective.
C) have not proven highly successful.
D) are not within the jurisdiction of economic policy.

Question 48

Contrast the views of supporters and opponents of the 2012 Obama administration regulation related to greenhouse gas emissions by power plants in the United States.

Question 49

The average weight of American adults increased by about 10 pounds in the 1990s.In November 2004,it was reported that U.S.airlines spent $275 million more in fuel costs to transport this additional weight.Under what circumstances would this increased cost be an externality of obesity,and under what circumstances would it not be an externality?