Question 1

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 production process 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 variable technology implies that the production process can be altered to reduce pollution, but at a cost. Therefore, the marginal private cost of air quality may not reflect the full cost of reducing pollution, since the polluter may choose to produce at a level that does not account for the negative externalities imposed on society. On the other hand, the marginal social cost of air quality includes the private cost to the polluter plus the external cost to society. When the marginal social cost equals the marginal social benefit, it means that society is getting the most value from the production process, taking into account both the private and external costs and benefits.

Question 2

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

Accepted Answer

This is because as more pollution is abated, there is a reduction in negative externalities such as reduced health costs and improved environmental quality, which results in an increase in the total social benefit.

Question 3

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 4

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

The answer of The marginal social cost of air quality...

Question 5

NARRBEGIN: Exhibit 17-3
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 equals the marginal cost, which occurs at an air quality level of 50. At this level, the total benefit equals $300, and the total cost equals $200. Any lower or higher level will result in either a lower total benefit or a higher total cost, making 50 the best choice.

Question 6

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

Accepted Answer

The answer of The marginal social cost curve is downward...

Question 7

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

The answer of The marginal social benefit of air quality
A)...

Question 8

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 answer of The optimal level of water and air...

Question 9

NARRBEGIN: Exhibit 17-3
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 NARRBEGIN: Exhibit 17-3
Exhibit 17-3
 
-In Exhibit 17-3,...

Question 10

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 not zero, as some level of pollution is inevitable. It occurs when the marginal social benefit of air quality exceeds the marginal social cost. If the marginal social benefit curve of air quality shifts rightward, this means there are more benefits to society from cleaner air, making the optimal level of air quality higher. Thus, C is the correct answer.

Question 11

The marginal social benefit curve for water quality slopes downward because
A) the total benefit from clean water decreases as water becomes cleaner
B) the added benefit from cleaner water is greater when water quality is poor than when water quality is high
C) the added benefit from cleaner water is smaller when water quality is poor than when water quality is high
D) the total benefit from clean water increases as water becomes cleaner
E) people demand clean water at any price

Accepted Answer

As water quality improves, the additional benefits from any further improvement become smaller. However, when water quality is poor, even a small improvement can have a significant impact on the social benefit of clean water. Therefore, the marginal social benefit curve for water quality slopes downward.

Question 12

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

Accepted Answer

Environmental problems, such as pollution and resource depletion, occur when the negative impacts of economic activity on the environment are not fully accounted for in the private costs and benefits of that activity. This leads to a situation where the social costs of the activity are greater than the private costs, resulting in harm to the environment and society as a whole.

Question 13

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 14

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 ensures that the costs and benefits of pollution are balanced and society is getting the most benefit at the lowest cost. A level of zero pollution is not always feasible or economically efficient, as some level of pollution may be necessary for economic activity or other functions. The average social cost and total social cost may not accurately reflect the marginal costs and benefits, and minimizing the marginal social cost ensures the most efficient outcome.

Question 15

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 allows firms to reduce emissions in the most cost effective manner, given their unique cost structure. This approach offers flexibility and recognizes that different firms may have different abilities and resources to reduce pollution. By finding the most cost-effective way to reduce emissions, overall pollution reduction can be achieved at the lowest possible cost to society.

Question 16

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 17

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 18

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

Accepted Answer

This is because at the point where MSB=MSC, the marginal social benefit of pollution control equals to the marginal social cost of pollution control, which is the point where the optimal air quality level can be achieved.

Question 19

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

The traditional command-and-control approach involves setting engineering standards that apply to all situations and do not recognize unique circumstances. The government dictates what must be done and how it must be done, leaving little room for flexibility or innovation by the regulated entities.

Question 20

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 of pollution abatement is 85 percent, then only achieving 75 percent abatement would mean that there is still too much pollution in the environment. Therefore, society would be worse off if 75 percent is abated instead of the optimal 85 percent. The other choices are not necessarily true based on the information given.

Quiz 17: Externalities and the Environment

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

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

The optimal level of air quality

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

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

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

The marginal social benefit of air quality

The optimal level of water and air quality

NARRBEGIN: Exhibit 17-3 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

The optimal level of air quality

The marginal social benefit curve for water quality slopes downward because

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

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 pollution is

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

The optimal level of air quality will increase if

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

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

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

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?