Question 1

The optimal level of air quality
A)is 100 percent, which creates a pollution-free environment
B)is smaller the lower the marginal social cost of air quality
C)is greater the lower the marginal social benefit of air quality
D)is greater the lower the marginal social cost of air quality
E)is smaller the greater the marginal social benefit of air quality

Accepted Answer

The optimal level of air quality is determined by comparing the marginal social cost and marginal social benefit. The optimal level occurs where the marginal social benefit equals the marginal social cost. Since marginal social cost decreases as air quality increases, and marginal social benefit decreases as air quality increases, the optimal level of air quality is greater the lower the marginal social cost of air quality. Therefore, the best choice is D.

Question 2

If production is characterized by variable technology, the optimal level of air quality occurs where
A)the marginal private cost of air quality equals the marginal social benefit
B)the marginal social cost of air quality equals the marginal social benefit
C)the marginal social cost of air quality equals the marginal private cost of air quality
D)government regulators set it
E)all costs are absorbed by the polluter

Accepted Answer

In a situation with variable technology, the optimal level of air quality occurs where the marginal social cost of air quality equals the marginal social benefit. This is because the marginal social cost includes both the private cost to the polluter and the external costs imposed on society, while the marginal social benefit includes the private benefit to the polluter and the external benefits enjoyed by society. Therefore, this option takes into account all costs and benefits, making it the best choice.

Question 3

As more pollution is abated, the marginal social benefit from further abatement diminishes.

Accepted Answer

This is because the initial efforts to reduce pollution may have a higher impact on improving public health and environmental quality, but as pollution levels decrease, the additional benefits from further abatement become smaller in comparison to the costs. Therefore, the marginal social benefit decreases.

Question 4

Exhibit 17-3  In Exhibit 17-3, the welfare loss (from society's perspective)that results from 70 units of air quality is shown by area
A)edcb
B)eda
C)bac
D)adc
E)there is no loss

Accepted Answer

The answer of Exhibit 17-3  In Exhibit 17-3, the...

Question 5

Environmental problems result when social costs and benefits are different from private costs and benefits.

Accepted Answer

Environmental problems often arise when the costs and benefits of activities that cause harm or benefit to the environment are not fully reflected in the prices charged in the marketplace. This creates a situation where individuals or companies may engage in activities that are harmful to the environment because they do not bear the full costs of those activities, while others may not engage in activities that would be beneficial to the environment because there is no financial incentive to do so. This is known as a "market failure" and is a common cause of environmental problems.

Question 6

The optimal level of water and air quality
A)is zero, which is a pollution-free environment
B)occurs when the marginal private cost of air quality equals its marginal social cost
C)is greater if the marginal social cost curve of air quality shifts downward
D)occurs when all negative externalities are eliminated
E)eliminates the common pool problem

Accepted Answer

The optimal level of water and air quality is greater if the marginal social cost curve shifts downward, as it implies that the cost of achieving higher quality is lower, allowing for a higher optimal level.

Question 7

Exhibit 17-3  In Exhibit 17-3, the optimal air quality level is where the MSB=MSC.

Accepted Answer

This statement is correct. The optimal air quality level is where the marginal social benefit (MSB) of reducing pollution is equal to the marginal social cost (MSC) of pollution control. This equilibrium point maximizes social welfare.

Question 8

The marginal social cost curve is downward sloping under variable technology.

Accepted Answer

The marginal social cost curve is typically upward sloping, reflecting increasing costs with additional production, even under variable technology.

Question 9

The optimal level of air quality will increase if
A)the cost of polluting increases
B)pollution is found to be self-absorbing
C)a new process allows pollution to be removed more cheaply
D)the marginal social cost of air quality increases
E)the marginal social benefit of air quality decreases

Accepted Answer

The answer of The optimal level of air quality will...

Question 10

The marginal social benefit of air quality
A)declines as air quality increases
B)rises as air quality increases
C)remains constant as air quality increases
D)first falls then rises as air quality increases
E)is always negative

Accepted Answer

As air quality improves, the additional benefit to society from further improvements typically decreases, reflecting diminishing marginal returns.

Question 11

To achieve the socially optimal level of pollution, the biggest polluters should be targetted for the greates reduction in pollution.

Accepted Answer

The answer of To achieve the socially optimal level of...

Question 12

If a government regulation states that fluorocarbon emissions should be abated by 75 percent but the optimal level of pollution abatement is 85 percent, which of the following must be true?
A)The free market will not reduce pollution by less than 85 percent.
B)The free market will accomplish 85 percent abatement, but it will be inefficient.
C)If only 75 percent of the pollution is abated, the society will be better off than if 85 percent had been abated.
D)If only 75 percent of the pollution is abated, the society will be worse off than if 85 percent had been abated.
E)If 75 percent of the pollution is abated, then in the next period the government should set the abatement level at 95 percent.

Accepted Answer

If the optimal level is 85 percent and the regulation only requires 75 percent abatement, then society will be worse off than if 85 percent had been abated. This is because the additional 10 percent of abatement would have provided further benefits to society. It is not necessarily true that the free market will accomplish 85 percent abatement, and it is not stated that it would be inefficient. It is also not stated that society would be better off if only 75 percent had been abated, so choice C is false. Choice E is not relevant to the information provided.

Question 13

As more pollution is abated, the total social benefit from pollution abatement increases.

Accepted Answer

This is because pollution abatement results in less negative externalities, such as health problems and environmental damage, which leads to a higher overall well-being and social welfare. As the level of pollution decreases, the total benefits from abatement increase.

Question 14

A tannery discovers a technology that makes it cheaper to reduce the air pollution it generates in making paper.On a graph of the optimal level of air quality, the use of the new technology would be represented by
A)a leftward shift of the marginal social cost curve
B)a rightward shift of the marginal social cost curve
C)movement to the right along the marginal social cost curve
D)movement to the left along the marginal social cost curve
E)a downward shift of the marginal net benefit curve

Accepted Answer

The use of the new technology would mean that the cost of reducing air pollution decreases, resulting in a rightward shift of the marginal social cost curve. This means that the optimal level of air quality is now achieved at a lower cost, which is beneficial for both the industry and society as a whole.

Question 15

The optimal level of air quality
A)is always zero
B)occurs when the marginal social cost of air quality exceeds the marginal social benefit
C)is greater if the marginal social benefit curve of air quality shifts rightward
D)occurs when positive externalities are eliminated
E)eliminates the common pool problem

Accepted Answer

The optimal level of air quality is greater if the marginal social benefit curve shifts rightward, indicating increased benefits from improved air quality.

Question 16

Exhibit 17-3  In Exhibit 17-3, the optimal air quality level is
A)0
B)40
C)50
D)70
E)100

Accepted Answer

The optimal air quality level in Exhibit 17-3 is where the marginal benefit of reducing pollution equals the marginal cost of reducing pollution. This occurs at a pollution level of 50, where the marginal benefit and marginal cost intersect. Therefore, the best choice is C.

Question 17

When using the traditional command-and-control approach to environmental regulation, the government attempts to
A)set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement
B)determine the most efficient method for different industries
C)make allowances for differences across industries and between firms
D)set engineering standards that are applicable to all situations and does not recognize unique circumstances
E)set a maximum requirement and they allows the individual firm the latitude of choosing the most efficient method

Accepted Answer

When using the traditional command-and-control approach to environmental regulation, the government sets engineering standards that are applicable to all situations and does not recognize unique circumstances.

Question 18

The optimal level of pollution is
A)zero
B)the level at which the marginal social cost of air quality equals the marginal social benefit
C)the level at which the average social cost of air quality equals the average social benefit
D)the level at which the total social cost of air quality equals the total social benefit
E)the level at which the marginal social cost of air quality is minimized

Accepted Answer

The optimal level of pollution is the level at which the marginal social cost of air quality equals the marginal social benefit. This means that the costs of reducing pollution would be greater than the benefits gained from reducing it any further. Therefore, at this level, society is getting the maximum benefit from its resources. Choice A is too idealistic and not attainable in practice. Choices C and D do not take into account the marginal analysis which is crucial in determining the optimal level of pollution. Choice E only looks at minimizing cost, ignoring the benefits gained from pollution reduction.

Question 19

When using the economic efficiency approach to controlling air and water pollution, the government
A)forces each firm to produce emissions in the most cost efficient manner irrespective of its cost structure
B)offers each firm the flexibility to reduce emissions in the most cost effective manner, given its unique cost structure
C)offers each firm the option of choosing between the cost minimizing emission level and the profit maximizing emission level
D)provides each firm with some fixed rules and then requires them to maximize profits given these fixed rules
E)offers each firm the option of using marginal cost pricing and average cost pricing when determining the optimum emissions levels

Accepted Answer

The economic efficiency approach suggests that each firm should be given flexibility to reduce emissions in the most cost-effective way according to its unique cost structure. This is because different firms may have different production processes and cost structures, and hence, their optimal pollution reduction methods may vary. Therefore, option B provides the best approach for controlling air and water pollution efficiently.

Question 20

The marginal social cost of air quality increases as air quality increases.If the dirtiest production process would create 700 tons of pollutants, then
A)eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons
B)eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons
C)more damage will be done by the first 20 tons of pollution than by the last 20 tons
D)more damage will be done by the last 20 tons of pollution than by the first 20 tons
E)the optimal level of air quality is to reduce pollution by 700 tons

Accepted Answer

As air quality increases, the marginal social cost of improving it further also increases, meaning it is cheaper to eliminate the initial tons of pollution than the last tons.

Quiz 17: Externalities and the Environment

The optimal level of air quality

If production is characterized by variable technology, the optimal level of air quality occurs where

As more pollution is abated, the marginal social benefit from further abatement diminishes.

Exhibit 17-3 In Exhibit 17-3, the welfare loss (from society's perspective) that results from 70 units of air quality is shown by area

Environmental problems result when social costs and benefits are different from private costs and benefits.

The optimal level of water and air quality

Exhibit 17-3 In Exhibit 17-3, the optimal air quality level is where the MSB=MSC.

The marginal social cost curve is downward sloping under variable technology.

The optimal level of air quality will increase if

The marginal social benefit of air quality

To achieve the socially optimal level of pollution, the biggest polluters should be targetted for the greates reduction in pollution.

If a government regulation states that fluorocarbon emissions should be abated by 75 percent but the optimal level of pollution abatement is 85 percent, which of the following must be true?

As more pollution is abated, the total social benefit from pollution abatement increases.

A tannery discovers a technology that makes it cheaper to reduce the air pollution it generates in making paper.On a graph of the optimal level of air quality, the use of the new technology would be represented by

The optimal level of air quality

Exhibit 17-3 In Exhibit 17-3, the optimal air quality level is

When using the traditional command-and-control approach to environmental regulation, the government attempts to

The optimal level of pollution is

When using the economic efficiency approach to controlling air and water pollution, the government

The marginal social cost of air quality increases as air quality increases.If the dirtiest production process would create 700 tons of pollutants, then