Chapter 14

Sophisticated waste treatment plants can reduce organic pollution by up to ____ percent.

99

An emission charge is

A fee imposed on polluters based on the quantity of pollution they generate.

The marginal cost to society of reducing pollution increases as the level of pollution reduction increases because of the law of

Diminishing returns.

The reason pollution occurs is because people tend to

Maximize their personal welfare, balancing private benefits against private costs.

In order to maximize social welfare, a firm's production of a good should occur at the output where

Social marginal cost equals social marginal benefit.

The article "New Rules Would Cut Thousands of Coal Jobs" illustrates that

The costs of pollution abatement must be balanced against the benefits.

If a manufacturer does not have to pay for its contribution to pollution, it will produce

Too much output from a social viewpoint.

In 2007 the United Nations concluded that global warming

Was the result of human activity with a 90 percent probability.

Refer to Table 28.1. Suppose the government allows these two firms to trade pollution permits. What would be the price of a permit to emit the second ton of pollutants?

Between $280 and $400. Because the paper plant can reduce its first and second tons at a lower cost than the steel plant can its first ton, the paper plant will reduce its pollution by two tons and the steel plant will pay the paper plant (for assuming the added abatement responsibility) a price between the paper plant's cost of its second ton, $280, and $400, the cost the steel plant would incur to reduce emissions by one ton.

When the government requires a firm to pay an emission charge in proportion to its pollution,

Both average total costs and marginal costs rise.

One In the News article titled " Recycling Wastes Money " suggests that the government has decided to intervene by

Bypassing the market. Public policy need not rely on tradable permits or other market incentives to achieve desired pollution abatement. The government could instead simply require firms to reduce pollutants by specific amounts and even specify which abatement technology must be used. This approach is often referred to as the command-and-control option.

In Table 28.2, which firm has the greatest difference between social and private costs?

External costs are the difference between social costs and private costs. Firm C has external costs of $175, whereas Firm A's external cost is $0, Firm B's is $100, and Firm D's is $50.

In Figure 28.1, if the externality is internalized, the rate of output will be

If pollution costs are internalized, a firm will choose to produce at the output level where MR is equal to social MC, at 200 units.

A market for power plant pollution rights will

Lower pollution control costs. Tradable pollution permits lower pollution control costs because the firms with low abatement costs will reduce their pollution by more than what is required and will then sell their permits to the firms with high abatement costs at a price between the costs of abatement of each of the firms.

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 reduced pollution through

Pollution fines.

A polluting company may be able to purchase the right to pollute through

Pollution permits.

Which of the following is not the case when social costs are greater than private costs?

Resources are allocated efficiently.

Laws requiring the sorting and recycling of trash are an example of

Process regulation. Process regulation is a type of command-and-control policy requiring specific processes such as catalytic converters, lead-free gasoline, and sorting and recycling.

Tradable pollution permits, when compared to command-and-control options, tend to

Provide the same amount of pollution abatement at a lower cost. Marketable pollution permits encourage firms with more efficient pollution control technologies to overachieve, thereby earning pollution permits that can be sold to firms with more expensive pollution control technologies. Such trades reduce the average cost of pollution control and at the same time reduce pollution.