econ test 2 homeworks and tophat

In the United States, once environmental projects are deemed feasible, the selection criteria used are

allocative efficiency or cost effectiveness

Installing an air purifier is an example of

averting expenditure

_method uses changes in spending on goods that are substitutes for environmental quality to measure willingness to pay.

averting expenditure

_ estimates benefits as the reduction in spending on goods that are substitutes for a cleaner environment

averting expenditure method

Consider the market for an ozone depleting substance where the market demand and supply equations, respectively are as follows Qd=20-1.5P Qs=5+0.5P where P is the per unit price. If a $2 excise tax is levied on the seller, how much of the excise tax is borne by the consumer.

$0.5

Suppose the accounting cost of an environmental policy is $100 and the implicit costs are $400. Then $___ is an accurate measure of resource utilization associated with this policy.

$500

Suppose the total social cost of abatement is given as TSC=0.4A^2 +12A where A is the level of abatement in units As a result of an environmental policy, if the level of abatement is increased from 50 to 60 units, the incremental cost of abatement is $___.

$560

Consider the market for an ozone depleting substance where the market demand and supply equations, respectively are as follows Qd=20-1.5P Qs=5+0.5P Where P is the price per unit If a $2 excise tax is levied on the seller, what is the price paid by the consumer.

$8

If the MACs for firm 1 and 2 are: MAC1 = 0.4A1 and MAC2 = 0.8A2, respectively, and the combined abatement standard is 15 units, then the cost-effective abatement levels are __ units for firm 1 and __ units for firm 2.

10,5

Suppose the combined abatement standard is set at 20 units and firm J and firm K have MAC functions of MACJ = 0.5A and MACK=0.75A, respectively. Then, firm J should abate __ units and firm K should abate __ units.

12,8

Suppose a firm faces an emission charge implemented as a marginal tax (MT) of 12 and that its MAC = 0.6A. Calculate the abatement level (A) (use only whole numbers, no decimals) at which the firm would be indifferent between paying a tax and abatement.

20

Suppose that for some abatement equipment market, the marginal social benefit, MSB = 500 - 1Q, and marginal private benefit, MPB = 300 - 0.8Q, then the Pigouvian subsidy must equal _____ at the efficient output level. Q refers to the units of abatement equipment.

200-0.2Q

Suppose an industrial unit is releasing emissions into the air leading to health problems and environmental issues. The marginal costs, marginal benefits of production, respectively, are as follows MSB=60+0.4Q MSC=10+0.1Q MEC=0.05Q The product charge (Pigouvian tax) needed to achieve a socially efficient outcome is $ __. (Do not put in the $ sign or use decimals).

5

To estimate the incremental benefits of an environmental program, the travel cost method is adopted with the following pre and post recreational inverse demand functions pre policy: P=32-0.02V1 post policy: P=80-0.02V2 v is the number of visitors and p is the admission fee If the admission fee is $20 per visitor and the number of pre and post policy visitors, V1 and V2 respectively are

600,3000

Suppose the marginal cost and marginal benefit functions associated with some air quality legislation are estimated as follows. MSB=70-0.1A MSC=10+0.7A where A is the abatement level in units. Efficiency requires that the abatement standard be set at __ units.

75

To estimate the incremental benefits of an environmental program, the travel cost method is adopted with the following inverse pre and post- recreational demand functions pre policy: P=32-0.02V1 post policy: P=80-0.02V2 v is the number of visitors and p is the admission fee If the admission fee is $20 per visitor, and the number of pre- and post- policy visitors are V1 and V2, respectively, the change in consumer surplus as a result of the program is $___.

86,400

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.

False

An environmental standard that specifies a pollution limit along with the equipment to be used to achieve that limit is called a performance-based standard.

False

One of the conditions needed to economically justify relatively higher standards of air quality in PSD areas compared with non attainment areas is

MSC of PSD areas is below MSC of non attainment areas

Consider the market for an ozone depleting substance where the market demand and supply equations, respectively are as follows Qd=20-1.5P Qs=5+0.5P where P is the per unit price. If a $2 excise tax is levied on the seller, then the new supply curve is

Q's=0.5P+4

A controversy in the climate change debate is the predicted response to increased production of greenhouse gases.

True

A pollution charge can be implemented as an emission charge.

True

For a Pigouvian tax to be effective, the unit tax must be equal to marginal external cost at the socially efficient output level.

True

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.

True

In a deposit-refund system, the deposit makes the polluter internalize the externality caused by improper waste disposal by absorbing the cost of any damage it might generate in advance.

True

Market-based instruments are a secondary form of control when it comes to environmental problems.

True

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

True

The production of ozone depleting substances can be modeled as a negative externality.

True

United States first opted to (partially) ban use of CFC's in 1978.

True

Criteria based pollutants typically impact ____ section of society compared with ___ air pollutants.

a larger, hazardous

____ cost does not vary based on the amount of abatement.

capital

The most likely explanation agreed on by scientists as the cause of ozone depletion is

chlorofluorocarbons

The ____ method measures benefits based on a technical relationship between an environmental contaminant and its observed damage.

damage function

____ costs provide a more accurate measure of resource utilization.

economic

Environmental justice is a ___ criteria used in US environmental policy.

equity

If based on the present value of net benefits, a project is considered feasible then it must be the case that the ratio of present value of benefits to costs for the same project ____ and the project is considered ____.

exceeds one, feasible

If an individual derives utility from the preservation of an endangered species. This is an example of ___ of the species.

existence value

An excise tax levied on the buyer shifts the demand curve up.

false

Criteria based air pollutants pose more risk to human beings compared to hazardous air pollutants.

false

Global warming and Climate Change are technically the same thing.

false

Hazardous air pollutants pose less risk to human health compared to criteria based air pollutants.

false

Implicit costs involve expenditures of money.

false

Incremental benefits of an environmental policy are just the primary benefits of a policy.

false

The damage function method estimates all aspects of incremental benefits

false

Which of the following pollution charges have been commonly proposed to tackle carbon dioxide emissions.

gasoline tax, carbon tax, btu tax

For a environmental project to be feasible, the ratio of present value of benefits to present value of costs must _____.

greater than 1

Under the ____ method, a good or service can be valued for characteristics it possesses.

hedonic price method

_____ environmental cost is rarely captured in analyses

implicit

The market price of a house depends on several attributes including the environmental quality around the house. Thus, environmental quality has a ____.

implicit price

In the US market for chlorofluorocarbons (CFCs), the phaseout of CFCs lead to ___ in the price of CFCs.

increase

Suppose the marginal cost and marginal benefit functions associated with some air quality legislation are estimated as follows. MSB=70-0.1A MSC=10+0.7A where A is the abatement level in units. If the abatement standard is set at 80 units then this standard will be ____.

inefficient

The efficiency criteria outlined by Ronald Reagan applied to any ___rule.

major

Climate change ____ due to human activities.

might be

Real discount rate is the nominal discount rate ____ the inflation rate

minus

Greenhouse gases are identified as

neither criteria nor hazardous pollutants

A gasoline tax is not considered a better alternative to a carbon tax because it is

not broad based

The implication of Portney's analysis of Clean Air Act Amendments is that the private sector is _____.

over regulated

The major issues associated with global air pollution are:

ozone depletion and climate change

The most commonly used market based instrument to control pollution, internationally, is a

pollution charge

In order to adjust benefit and cost estimates for the changing value of the dollar over time, _____ modification(s) is(are) necessary

present value determination and inflation correction

Which of the following decision criteria is used in ranking feasible environmental policy proposals.

present value of net benefits

In a cap and trade system with two polluters with different costs of marginal abatement (MAC),the high cost polluter will buy (identify the strict condition) a permit from the low cost polluter as long as

price charged by the low cost polluter is lower than the MAC of high cost polluter.

____ estimates benefits as an increase in consumer surplus (CS) in the market for a complement to environmental quality , as policy improves that quality

travel cost method

A Pigouvian subsidy equals the marginal external benefit at the efficient equilibrium

true

A pollution charge is based on the "Polluter-Pays-Principle".

true

An excise tax is levied on the seller shifts the supply curve up.

true

Carbon dioxide (CO2) is a primary greenhouse gas contributing to global warming.

true

Clean Air Act of 1963 was the first comprehensive piece of air quality legislation in the US.

true

Cost-benefit analysis is used by the public sector to evaluate gains and losses associated with a policy.

true

Discounting allows us to convert a future value into a present value.

true

EPA monitors the air in large metropolitan statistical areas.

true

Economic costs include both explicit and implicit costs.

true

Greenhouse gas pollutants are a major source of air pollutants

true

In Cost-benefit analysis, time adjustments are needed to account for the opportunity cost of money.

true

The incremental cost of a policy is the difference between the total social cost after the policy and the total social cost before the policy.

true

The principal component of photochemical smog is tropospheric (ground- level) ozone (O3).

true

a product charge is one type of a pollution charge

true