Econ 202 ch 16 quiz

(Problem 7d). The two dry-cleaning companies in Collegetown, College Cleaners and Big Green Cleaners, are a major source of air pollution. Together they currently produce 350 units of air pollution, which the town wants to reduce to 200 units. The accompanying table shows the current pollution level produced by each company and each company's marginal cost of reducing its pollution. The marginal cost is constant for each cleaning company.

$390

(Problem 7a). The two dry-cleaning companies in Collegetown, College Cleaners and Big Green Cleaners, are a major source of air pollution. Together they currently produce 350 units of air pollution, which the town wants to reduce to 200 units. The accompanying table shows the current pollution level produced by each company and each company's marginal cost of reducing its pollution. The marginal cost is constant for each cleaning company.

$690

(Table: Coal Mine Pollution) Use Table: Coal Mine Pollution. The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine. The efficient quantity of pollution is _____ tons.

4

(Problem 7c). The two dry-cleaning companies in Collegetown, College Cleaners and Big Green Cleaners, are a major source of air pollution. Together they currently produce 350 units of air pollution, which the town wants to reduce to 200 units. The accompanying table shows the current pollution level produced by each company and each company's marginal cost of reducing its pollution. The marginal cost is constant for each cleaning company.

Big Green Cleaners will sell all of its 100 vouchers to College Cleaners.

(Problem 7b). The two dry-cleaning companies in Collegetown, College Cleaners and Big Green Cleaners, are a major source of air pollution. Together they currently produce 350 units of air pollution, which the town wants to reduce to 200 units. The accompanying table shows the current pollution level produced by each company and each company's marginal cost of reducing its pollution. The marginal cost is constant for each cleaning company.

One pollution voucher is worth $5 to College Cleaners and $2 to Big Green Cleaners.

(Problem 1b). What type of externality (positive or negative) is present in the following example? Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? Without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? Your next-door neighbor likes to build bonfires in his backyard, and sparks often drift onto your house.

This is a negative externality: the marginal social cost is greater than the marginal cost to the individual; there will be more bonfires in your neighbor's yard than is socially optimal.

(Problem 1a). What type of externality (positive or negative) is present in the following example? Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? Without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? Mr. Chau plants lots of colorful flowers in his front yard.

This is a positive externality; the marginal social benefit of the activity is greater than the marginal benefit to the individual; too few flowers will be planted.

Which example illustrates an environmental policy based on tradable emission permits?

allowing companies to buy and sell the right to a certain level of emissions

Your community requires the sewage-treatment plant to process raw sewage so that it is safe to return the water to the environment. This example illustrates:

an environmental standard.

Both emissions taxes and tradable emissions permits:

are efficient cost-minimizing methods of pollution reduction.

(Figure: Model of a Competitive Market) Use Figure: Model of a Competitive Market. Given the figure, if there are external costs, a tax imposed on sellers will:

decrease the equilibrium quantity.

For the same amount of pollution emitted, an emissions tax is said to be more efficient than is an environmental standard because all polluters:

emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax.

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

firms in the market produce the socially optimal level of pollution.

According to the Coase theorem, when negative externalities are present, a market will:

reach an efficient solution if transaction costs are low and property rights are well-defined.

The efficient rate of emissions occurs when:

the change in social benefits and the change in social costs from an additional unit of emissions are equal.

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:

the level at which the marginal social cost is equal to the marginal social benefit.

(Figure: The Quantity of Pollution) Use Figure: The Quantity of Pollution. If the amount of pollution emitted is 150:

the production of pollution is not socially optimal.

(Figure: Efficiency and Pollution) Use Figure: Efficiency and Pollution. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

too little pollution because its marginal social benefit would exceed its marginal social cost.

(Table: Coal Mine Pollution) Use Table: Coal Mine Pollution. The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 5 tons of pollution is produced:

too much pollution is produced.