MRU10.5: Trading Pollution: How Pollution Permits Paradoxically Reduce Emissions

If the government wants to reduce pollution at least cost, it must overcome: - its lack of control over the activities of private businesses. - the invisible hand of the market. - its lack of information about which factories are face low costs for pollution reduction. - its inability to pass pollution-reduction legislation.

A:

Which of these is NOT mentioned in the video as a benefit of using tradable pollution permits to reduce pollution instead of command and control? - More money left over to buy other things - Increased federal government tax revenue - Incentives to find the lowest-cost ways to reduce pollution - A lower price for pollution reduction

A: Increased federal government tax revenue

Which of these is NOT mentioned in the video as a possible reason that one polluter might face lower costs for reducing pollution? - The factory is newer. - The product produced has a less-polluting substitute. - The factory uses a different kind of coal. - The factory faces lower pollution-related fines.

A: The factory faces lower pollution-related fines.

Under tradable pollution permits, polluters who face the lowest costs for reducing pollution would: - choose to sell their permits and reduce their pollution. - choose to buy permits and reduce their pollution. - choose to sell their permits and continue polluting. - choose to buy permits and continue polluting.

A: choose to sell their permits and reduce their pollution.

If the cost of reducing pollution at factory A is lower than the cost of reducing pollution at factory B, then: - pollution reduction should be divided up between factories A and B such that the two factories are bearing the same cost for pollution reduction. - it is better to have factory B do more pollution reduction than factory A, to give factory B an incentive to reduce its pollution-reduction cost. - factories A and B should still reduce pollution by equal amounts because the cost of pollution reduction is secondary to the cost of pollution. - it is better to have factory A do more pollution reduction than factory B, since it would use fewer other resources.

A: it is better to have factory A do more pollution reduction than factory B, since it would use fewer other resources.

"Command and control," as it is used in the video, refers to: - the government making acid rain illegal. - the government ordering all factories to reduce pollution and telling them how to do it. - reducing pollution at the lowest total cost. - tradable pollution permits.

A: the government ordering all factories to reduce pollution and telling them how to do it.

The government can ensure the same amount of pollution reduction from command and control and from tradable pollution permits by controlling: - the fines assessed for polluting. - pollution taxes. - the price of the tradable permits. - the number of permits issued.

A: the number of permits issued.

Under tradable pollution permits, those polluters who buy permits and continue to pollute would do so because: - it is impossible for them to reduce their pollution. - the permit price is lower than their pollution reduction cost. - a certain amount of pollution is actually beneficial to the environment. - the pollution fines that they will face from polluting are less than the price of the permits.

A: the permit price is lower than their pollution reduction cost.

Tradable pollution permits are better than command and control for reducing pollution because: - they raise more revenue for the government. - they distribute the burden of pollution reduction equally on all polluters. - they harness the knowledge and energy of entrepreneurs. - they are politically more acceptable.

A: they harness the knowledge and energy of entrepreneurs.

In practice, tradable pollution permits: - actually caused pollution to increase. - worked even better than any expert had predicted. - worked about as well as economists had hoped. - did not work as well as environmentalists had expected.

A: worked even better than any expert had predicted.