Question 1

According to the cost-effectiveness criterion, all polluting sources would abate pollution up to the point where their individual abatement levels were equal.

Accepted Answer

A) True 
 B)False  False

Question 2

According to the textbook application about Catano, Puerto Rico, the primary source of the severe air pollution in that city was identified to be

Accepted Answer

A)   a nearby oil refinery
B)   two large electrical power plants
C)   large 18-wheelers transporting goods from nearby docks
D)   a sewage sludge incinerator B

Question 3

According to the textbook application, recent EPA rules and regulations proposed under the Obama administration

Accepted Answer

A)   fall into the category of market-based policies
B)   have been met with wide approval among all constituencies
C)   achieve allocatively efficient levels of pollution abatement
D)   have been shown to meet the cost-effective criterion
E)   none of the above E

Question 4

Suppose that two firms, X and Y, face the following abatement costs:
MACS1U1B1XS1U1B0 = 1.2AS1U1B1XS1U1B0, MACS1U1B1YS1U1B0 = 0.3AS1U1B1YS1U1B0
TACS1U1B1XS1U1B0 = 0.6AS1U1B1XS1U1B0S1U1P12S1S1P0 S1U1B1 S1U1B0S1U1B1 S1U1B0TACS1U1B1YS1U1B0 = 0.15AS1U1B1YS1U1B0S1U1P12S1S1P0
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .
-According to this model, if the government uses a uniform standard

Accepted Answer

A)   firm Y would face a marginal abatement cost that is higher than that for firm Y
B)   that standard would achieve a cost-effective solution
C)   firm Y should do more of the abating and firm X should do less to move closer to a cost-effective solution
D)   firm X's marginal abatement cost would be $48, and firm Y's marginal abatement cost would be $12

Question 5

Environmental standards can be specified as

Accepted Answer

A)   ambient standards
B)   performance-based standards
C)   technology-based standards
D)   all of the above
E)   (a)  and (b)  only

Question 6

It is highly unlikely that environmental standards are set at an efficient abatement level because of

Accepted Answer

A)   legislative constraints
B)   the absence of full information about the MSB and MSC of abatement
C)   differences in MSB and MSC levels at the regional level
D)   all of the above

Question 7

Among the reasons that may explain why abatement standards are not set efficiently is imperfect information.

Accepted Answer

A) True 
 B)False

Question 8

Based on the criteria of allocative efficiency, an abatement standard is set optimally if

Accepted Answer

A)   that standard is benefit-based
B)   it is set where the MSB of abatement is equal to Σ(MACmkt + MC
E)  .
C)   the least amount of resources is used to achieve the standard
D)   it is set at the point where MSB of abatement equals zero

Question 9

Suppose that two firms, X and Y, face the following abatement costs:
MACS1U1B1XS1U1B0 = 1.2AS1U1B1XS1U1B0, MACS1U1B1YS1U1B0 = 0.3AS1U1B1YS1U1B0
TACS1U1B1XS1U1B0 = 0.6AS1U1B1XS1U1B0S1U1P12S1S1P0 S1U1B1 S1U1B0S1U1B1 S1U1B0TACS1U1B1YS1U1B0 = 0.15AS1U1B1YS1U1B0S1U1P12S1S1P0
Further assume that the combined abatement standard is 40 units for both firms. Use this information for any or all of Questions .
-Based on the model given, the cost-effective solution would arise if

Accepted Answer

A)   each firm abates 20 units of pollution
B)   firm X abates 8 units, and firm Y abates 32 units
C)   firm Y does all the abating because its MAC is lower
D)   firm X abates 24 units, and firm Y abates 16 units
E)   none of the above

Question 10

According to the cost-effective abatement criterion, all polluting sources would abate pollution up to the point where their individual total abatement cost (TAC) levels were equal.

Accepted Answer

A) True 
 B)False

Question 11

Consider the environmental problem created by two paint companies that release chromium wastes into a nearby stream. The state authorities set a standard for the waterway that requires a combined abatement level (A) for chromium of 15 units. Suppose that the two firms, firm 1 and firm 2, face the following marginal abatement cost equations: MAC₁ = 3.2A₁ and MAC₂ = 0.8A₂, where costs are measured in thousands of dollars. a. If the state uses a uniform standard, show that such a ruling would not be cost-effective. Which firm should be abating more, and which firm should be abating less? b. Now find the cost-effective solution.

Accepted Answer

The answer of Consider the environmental problem created by two...

Question 12

If an abatement standard is set to satisfy allocative efficiency on a national scale, that standard would not be optimal at the regional level unless the national MSB and MSC functions were identical to those at the regional level.

Accepted Answer

A) True 
 B)False

Question 13

According to the criteria of cost-effectiveness, an abatement standard is set optimally if

Accepted Answer

A)   that standard is benefit-based
B)   it is set where the MSB of abatement is equal to Σ(MACmkt + MC
E)  .
C)   the standard is reached at minimum cost
D)   it is set at the point where MSB of abatement equals zero
E)   it is set at the point where MSC of abatement equals zero

Question 14

If an abatement standard is set to achieve allocative efficiency at the national level, then

Accepted Answer

A)   that standard necessarily achieves allocative efficiency in all regions
B)   the standard cannot be optimal at the regional level unless the MSB and MSC for all regions are identical to one another
C)   all regions will abate below the optimal level
D)   at that abatement standard, all regions will face MSC higher than MSB

Question 15

Suppose the combined abatement standard is set at 22 units and firm J and firm K have MAC functions of MACJ = 0.5A, and MACK = 0.75A, respectively. If firm J is abating 10 units and firm K is abating 12 units, firm K should abate more units and firm J should abate less.

Accepted Answer

A) True 
 B)False

Question 16

A command-and-control approach to environmental policy

Accepted Answer

A)   requires that the least amount of resources be used to achieve an objective
B)   uses incentives to encourage pollution reduction
C)   uses limits or restrictions to directly regulate polluters
D)   is rarely used by governments in the United States and other nations

Question 17

According to the cost-effectiveness criterion, all polluting sources would abate pollution to the point where their individual marginal abatement cost (MAC) levels were equal.

Accepted Answer

A) True 
 B)False

Question 18

The marginal cost of enforcement (MCE)

Accepted Answer

A)   is the additional cost incurred by government to monitor and enforce abatement activity
B)   is a negatively sloped function
C)   can be measured as the vertical sum of MACmkt and MSC at any abatement level
D)   represents the horizontal sum of all polluters' MAC functions

Question 19

The command-and-control approach to environmental policy uses rules, emissions limits, and various incentive-based policy instruments.

Accepted Answer

A) True 
 B)False

Question 20

The marginal cost of enforcement (MCE) must be added vertically to the MACmkt to derive the marginal social cost (MSC) of abatement function.

Accepted Answer

A) True 
 B)False

Exam 4: Conventional Solutions to Environmental Problems: Command-And-Control Approach

According to the cost-effectiveness criterion, all polluting sources would abate pollution up to the point where their individual abatement levels were equal.

According to the textbook application about Catano, Puerto Rico, the primary source of the severe air pollution in that city was identified to be

According to the textbook application, recent EPA rules and regulations proposed under the Obama administration

Environmental standards can be specified as

It is highly unlikely that environmental standards are set at an efficient abatement level because of

Among the reasons that may explain why abatement standards are not set efficiently is imperfect information.

Based on the criteria of allocative efficiency, an abatement standard is set optimally if

According to the cost-effective abatement criterion, all polluting sources would abate pollution up to the point where their individual total abatement cost (TAC) levels were equal.

If an abatement standard is set to satisfy allocative efficiency on a national scale, that standard would not be optimal at the regional level unless the national MSB and MSC functions were identical to those at the regional level.

According to the criteria of cost-effectiveness, an abatement standard is set optimally if

If an abatement standard is set to achieve allocative efficiency at the national level, then

Suppose the combined abatement standard is set at 22 units and firm J and firm K have MAC functions of MAC_J = 0.5A, and MAC_K = 0.75A, respectively. If firm J is abating 10 units and firm K is abating 12 units, firm K should abate more units and firm J should abate less.

A command-and-control approach to environmental policy

According to the cost-effectiveness criterion, all polluting sources would abate pollution to the point where their individual marginal abatement cost (MAC) levels were equal.

The marginal cost of enforcement (MCE)

The command-and-control approach to environmental policy uses rules, emissions limits, and various incentive-based policy instruments.

The marginal cost of enforcement (MCE) must be added vertically to the MAC_mkt to derive the marginal social cost (MSC) of abatement function.