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ECON 2J03 - Environmental Economics – Test 1
Resources devoted to monitoring the behaviour of firms,
agencies, and individuals subject to environmental
regulations are called.
Question 1 options:
a) abatement costs b) enforcement costs c) private costs d) environmental costs
Question 2 (1 point)
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Suppose a manufacturing firm that is about to be regulated
faces the following actual and potential production costs: 1)
$2,500 before regulation; 2) $2,925 in the future without
the regulation; and 3) $3,240 in the future with the
regulation. The before/after cost of the regulation is
and the with/without cost of the regulation is.
Question 2 options:
a) $425; $ b) $425; $ c) $740; $ d) $315; $
Question 3 (1 point)
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When environmental regulation of an entire industry results
in output adjustments, the social cost of the regulation can
be measured by the changes in consumer and producer
surpluses.
Question 3 options:
True False
Question 4 (1 point)
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When supply and demand are linear curves, the incidence of
the tax depends on the slopes of the demand and supply
curves.
Question 4 options:
True False
Question 5 (1 point)
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Refer to the Figure below. Panel (a) and Panel (b)
represent industries that have experienced cost increases
due to environmental regulations. Assume that both price
increases are equivalent. Which panel reflects less impact
on the consumer and a large industry adjustment, in terms
of less output?
Question 7 options:
a) Panel (a) reflects a larger industry adjustment. b) Panel (b) reflects a larger industry adjustment. c) Panel (a) and Panel (b) reflect the same industry impact. d) The graphs do not indicate which industry is affected more by the regulations.
Question 8 (1 point)
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Refer to the Figure below. In Panel (b), the increase in
total cost of producing the original quantity of output at the
new cost associated with increased environmental
regulations would be
Question 8 options:
a) p 2 x r1. b) (d + e + f). c) p 2 x r2.
Question 9 (1 point)
abatement target will be minimized when the marginal
costs of abatement are across sources.
Question 11 options:
b) law of one price; equalized c) equimarginal principle; minimized d) Coase theorem; equalized
Question 12 (1 point)
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The height of the marginal damage curve at a particular
level of emissions shows how much total damages change if
there is a small change in the quantity of emissions.
Question 12 options:
False
Question 13 (1 point)
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Refer to Figure below. Total damages associated with
damage curve MD 2 at an emissions level of e 1 is.
a) equimarginal principle; equalized True
Question 13 options:
a) $ b) area a c) area b d) area a + b
Question 14 (1 point)
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External costs can drive a wedge between the market
demand curve and the social marginal WTP curve resulting
in a market failure.
Question 14 options:
True False
Question 15 (1 point)
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Refer to Table below. At a market price of $4.00, what is
industry supply?
Marginal Costs Firm A Quantity Firm B Quantity Firm C Quantity Firm D Quantity $1.00 0 0 0 0 $2.00 5 0 0 3 $3.00 8 6 1 8 $4.00 10 8 6 24 $5.00 12 10 7 28
Question 17 options:
a) 0 b) 48 units c) $ 192. d) Indeterminate. The table does reveal aggregate supply.
Question 18 (1 point)
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Low-phosphate detergents, mercury-free thermometers and
energy-efficient appliances are all examples of.
Question 18 options:
a) pollution-intensive goods b) low-carbon goods c) environmentally friendly goods d) pollution-free goods
Question 19 (1 point)
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A living resource can become non-renewable if the rate of
harvest exceeds the growth rate of the resource's stock.
Question 19 options:
True False
Question 20 (1 point)
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Economists believe people pollute because
Question 20 options:
a) people don't care b) people have too many options for their time c) governments are filled with corruption d) pollution is the cheapest waste disposal method of waste products
Question 21 (1 point)
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Climate change models have predicted an increase in the
earth's temperature, greater climate variability and more
extreme weather events in the 21
st
century if greenhouse
b) what is c) beneficial economic outcomes d) economic outcomes that are most likely
Question 24 (1 point)
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What are some of the issues with Hedonic estimation?
Question 24 options:
a) Distortion of housing markets and prices due to too few sales b) It is not easy to measure environmental quality c) Environmental quality is a subjective matter d) all of the above
Question 25 (1 point)
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In surveys and experimental work where people are asked
to compare gains and losses relative to a reference point,
they place a higher value on losses from this reference
point than gains.
Question 25 options:
True False
Question 26 (1 point)
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treats people in the same circumstances
identically.
Question 26 options:
a) Vertical equity b) Horizontal equity c) Intergenerational equity d) none of the above
Question 27 (1.5 points)
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The following equations represent the inverse supply and
demand functions in the market for Good A:
PC = 80 - ½ QD PP = 14 + QS
where PC and PP are the prices paid by consumers and
received by producers respectively. QD and QS are the
160 - 2Pc=Pp-14, Pp=Pc-P we can get P=58, Qd=160-116=44, Qs=58-14= With the tax, Pc+12=80-0.5Qd, Qd=160-2Pc-24, Qd=Qs, and Pc=Pp=P so 160 - 2Pc-24=Pp- 14 13P=174-24=150, so P= Thus, the amount paid by the producer is 50, and the amount paid by consumer is 62 (50+12). Tax incidence on consumer=62-58= Tax incidence on producer=58-50=
Question 28 (1 point)
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Assume reductions in the amount of ground level ozone
shift the marginal cost of producing alfalfa from MC 1 = 45 +
2QS to MC 2 = 45 + 0.5QS. Use the producer surplus to
estimate the maximum amount alfalfa producers would be
willing to pay for this improvement in the air quality if the
market price of alfalfa is $60/unit of output.
PS1=(60-45)*7.5/2=56.
PS2=(60-25)*30/2=
The maximum amount alfalfa producers would be willing to pay=225-56.25=168.
Question 29 (1 point)
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The following equations represent the MWTP function and
the private MC function in the market for some good where
a negative externality (i.e., pollution) results in damages of
$12 per unit of the good produced: MWTP = 400 - Q
D
MPC
= 55 + 0.5QS
Solve for the competitive market equilibrium output and the
socially efficient level of output for this market.
MWTP=MPC
400 - Q=55+0.5Q, Q=
Competitive market equilibrium output Q= MSC=MPC+MEC=55+0.5Q+12=67+0.5Q
