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Exam 16: Externalities

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Question 1

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Taxes are a more effective method of controlling pollution than are environmental standards because:

A) standards allow greater flexibility.
B) standards require less information.
C) standards never require the efficient level of output.
D) taxes encourage reducing pollution at the lowest possible cost.

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Question 2

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Economists and environmentalists agree that pollution is undesirable and that government policy should aim to achieve a zero-pollution society.

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Question 3

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Which statement is CORRECT?

Use the following to answer questions : $\begin{array}{l}\text { Table: Coal Mine Pollution }\\\begin{array} { c c c } \hline \begin{array} { l } \text { Quantity of } \\\text { Pollution } \\\text { (tons) }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Benefit }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Cost }\end{array} \\\hline 0 & \$ 800 & \$ 0 \\1 & 700 & 100 \\2 & 600 & 200 \\3 & 500 & 300 \\4 & 400 & 400 \\5 & 300 & 500 \\6 & 200 & 600 \\7 & 100 & 700 \\8 & 0 & 800 \\\hline\end{array}\end{array}$ -(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.Suppose that the marginal cost from the production process itself (to the producer) is 0.At the market-determined quantity of pollution,the marginal social cost of pollution is:

Use the following to answer questions : Figure: City with Two Polluters -An external benefit is a:

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

Use the following to answer questions : $\begin{array}{l}\text { Table: Externalities from Parks }\\\begin{array} { c c c } \hline \begin{array} { l } \text { Quantity of } \\\text { Land (acres) }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Benefit }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Cost }\end{array} \\\hline 0 & \$ 225 & \$ 0 \\1 & 200 & 50 \\3 & 150 & 150 \\4 & 125 & 200 \\5 & 100 & 250 \\9 & 0 & 450 \\\hline\end{array}\end{array}$ -(Table: Externalities from Parks) Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If 5 hectares are dedicated to the park,this outcome is _____ because _____.

When individuals take external costs and benefits into account:

Network externalities are often:

The socially optimal amount of pollution occurs where the marginal social benefit of pollution is _____ the marginal social cost of pollution.

Use the following to answer questions : $\begin{array}{l}\text { Table: Externalities from Parks }\\\begin{array} { c c c } \hline \begin{array} { l } \text { Quantity of } \\\text { Land (acres) }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Benefit }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Social } \\\text { Cost }\end{array} \\\hline 0 & \$ 225 & \$ 0 \\1 & 200 & 50 \\3 & 150 & 150 \\4 & 125 & 200 \\5 & 100 & 250 \\9 & 0 & 450 \\\hline\end{array}\end{array}$ -(Table: Externalities from Parks) Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If the government wants to achieve the optimum amount of land for the park,it could use a Pigouvian _____ of _____ per park hectare.

According to the Coase theorem,the private market can achieve an efficient outcome:

Suppose that an emissions tax is imposed on all dairy farms in Ontario.This tax would:

Use the following to answer questions : Figure: City with Two Polluters -(Figure: City with Two Polluters) Use Figure: City with Two Polluters.If the government issued licenses to emit a total of 1 600 tonnes of pollution,the market price to emit 1 tonne of pollution would equal:

Use the following to answer questions : Figure: City with Two Polluters -Suppose that the production of roses generates a positive externality in that travellers enjoy the scenic beauty of the garden.An appropriate government policy yielding the efficient outcome would be a:

Markets for the right to pollute are:

Use the following to answer questions : Figure: The Socially Optimal Quantity of Pollution -(Figure: The Socially Optimal Quantity of Pollution) Use Figure: The Socially Optimal Quantity of Pollution.In the figure,firms are the only beneficiaries of pollution,and costs are borne solely by others in the society.The optimal quantity of pollution could be achieved:

Use the following to answer questions : Figure: Efficiency and Pollution -(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 tonnes,there would be:

A plastics manufacturing plant dumps pollution into the Big River.This pollution leads to higher costs and disruption for fishermen on the river,for which they are not compensated.In this situation:

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