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Chapter 11:
Environmental Management and Sustainability
True/False Questions:
1) The Environmental Protection Agency (EPA) has estimated that compliance with
existing environmental regulation would cost each person in the United States
nearly $250 annually.
2) The EPA estimated that in the year 2004, it would cost a total of $950 billion
annually to comply with all environmental regulations.
3) Social efficiency is gained when collective well-being is minimal.
4) The key to environmental issues, according to your author, is that pollution that is
costly to prevent should be prevented.
5) Command-and-control regulation is a no-nonsense instrument that imposes
uniform controls and standards on similar source of pollution, resulting in lower-
than-efficient abatement costs.
6) Coase’s theorem pertains to market imperfections, including externalities and
public goods.
7) Social efficiency is one of the key standards used in Coase’s theorem.
8) In the case of toxic risk from an oil refinery, Coase’s theorem states that in the
absences of transactions costs that would preclude the bargaining leading to
private agreements, the socially efficient outcome can be realized if the
entitlement is assigned to either of the two parties.
9) The Coase theorem states that, in the absence of transaction costs that would not
impede the bargaining over public agreements, the socially efficient outcome can
be realized if and only if the entitlement is assigned to all parties.
10) The Coase theorem implies that when bargaining between two parties to an
externality is possible, social efficiency can be achieved.
11) From a Coasean perspective, social efficiency is a problem only when there are no
impediments to bargaining.
12) A market is a logical extension of a decentralized system in which entitlements
are assigned and can be traded..
13) Because of the very low transaction costs that would be connected with private
bargaining, automobile emissions are controlled through government regulations.
14) A tradable permits system has been adopted to reduce greenhouse gasses emissions to
achieve the goals specified in the Kyoto Protocol on global climate change.
15) Cap-and-trade systems are also called tradable permit systems.
16) One control of an externality in a market-based system is providing incentives for
abatement by internalizing the cost of the harm done by the pollutants.
17) A tradable permit system is said to be inferior to an emissions tax..
18) Emission tax systems are considered superior to tradable permits because the amount of
abatement is known in advance with a tax system.
19) China and India are two countries that are leading the way in reducing global warming.
20) The Kyoto Protocol deals with global climate change.
21) The Clinton administration signed the Kyoto Protocol on global climate change.
22) Those who signed the Kyoto Protocol agreed to use an emissions trading system to
improve the social efficiency of achieving their commitments.
23) The Kyoto Protocol had strong support in the U.S. Senate.
24) With the growing scientific evidence indicating global climate change, the George W.
Bush administration made the political and economic choice to support the Kyoto
Protocol.
25) The U.S. under the Bush administration has adopted an involuntary approach to
greenhouse gasses reduction.
26) The Environmental Protection Agency (EPA) is an independent department with a
cabinet level secretary of Environmental Affairs.
27) Because federal environmental regulation is a major undertaking, the budget for the EPA
was $53 billion in 2005 and covered over 34, 000 employees.
28) The EPA administrative process for enforcement of environmental laws includes the
filing of a complaint and a hearing before a district federal court.
29) The Food Quality Protection Act is under the jurisdiction of the Department of
Agriculture, not the EPA.
30) EPA regulation has usually been command-and-control.
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Multiple Choice Questions:
31) What percentage of the GDP in 2004 did the EPA estimate that it would cost to comply
with existing environmental regulations?
a) 2.1
b) 3.4
c) 4.7
d) 5.9
32) When is social efficiency attained?
a) Aggregate well-being is minimal
b) Aggregate well-being is total
c) Aggregate well-being is maximal
d) Aggregate economic costs are minimal
33) Coase’s Theorem pertains to _______, including ______ and ________.
a) Perfections; ethics; public goods
b) Imperfections; costs; private goods
c) Imperfections; externalities; private goods
d) Imperfections; externalities; public goods
34) What are the keys to incentive-based approaches to meeting environmental goals?
a) Imposes a cost and leaves it to individual polluters to decide how best to respond
b) Imposes a fine and leaves it to government to decide the regulations
c) Imposes sanctions of a certain limit and lets the individual polluters decide how to
manage it within government guidelines
d) Imposes a cost and dictates the incentives for managing the situation
35) From the Coasean perspective, social efficiency is a problem because of _________to
bargaining, which are referred to as ____________costs.
a) Complexities; inherent
b) Impediments; transactions
c) Impediment; business
d) Complexities; transactions
36) Why does government regulate automobile emissions?
a) Exorbitant costs
b) Unwillingness of business to cooperate at all
c) Government’s mandate to regulate all common goods
d) Disagreement on the effects of automobile pollution as a problem
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37) What approach has become an effective means of achieving environmental goals at the
least cost to society?
a) Command-and-control
b) Incentive or markets
c) Common goods
d) International agreements
38) Cap-and-trade systems are also called.
a) market systems
b) tradable permit systems
c) incentive systems
d) governmental systems
39) _________ systems cap the total allowed emissions of a particular pollutant, issues
permits for that amount, and allows the permits to be traded.
a) Market incentive
b) Kyoto Protocol
c) Cap-and-trade
d) Coase’s systems
40) What is the Kyoto Protocol concerned with?
a) Trade and pollution
b) Japanese cars and air pollution
c) Global climate change
d) Global ocean dumping
41) The Kyoto Protocol called for country-specific reductions in carbon dioxide emissions
by:
a) 2005.
b) 2010.
c) 2008.
d) 2006.
42) Which of the following countries rejected the Kyoto Protocol?
a) Russia
b) India
c) China
d) Australia
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43) The EPA was established in which decade?
a) 1950’s
b) 1960’s
c) 1970’s
d) 1980’s
44) How many employees did the EPA employ in 2008?
a) Over 4,500
b) Over 9,800
c) Over 17,000
d) Over 25,000
45) The federal government can seek both criminal and civil convictions of polluters from:
a) Firms only.
b) Firms, investors and customers.
c) Firms and individuals.
d) Individuals only.
46) What is the name of the account that was established to clean up toxic waste disposal
sites?
a) Toxic Waste Cleanup Fund
b) Superfund
c) SuperiorFund
d) ToxWasteFund
47) Two complaints in terms of government’s demands for cleaning up toxic wastes are:
a) Time and cost.
b) Litigation costs and new standards for cleanup.
c) Litigation costs and retroactive liability.
d) Retroactive liability and time.
48) Most of the costs of environmental protection are borne by _______?
a) Private parties
b) Government
c) Business
d) All of the above
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49) What is NIMBY?
a) Not In My Best Year
b) Not In My Backyard
c) Not In Money By Years
d) Not Involved More By Yards
50) The NIMBY movement is often directed toward
a) refuse disposal sites
b) toxic waste sites
c) facilities that may emit toxins
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Essay and Review Questions:
1) Choose an environmental issue you have concerns about and apply Coase’s theorem to it.
Be specific in your use of the issue and the theorem.
2) Discuss the strategy of the EPA and activists during the Republican control of Congress
starting in 1995 and beyond.
3) Prepare a speech to give to the Sierra Club and Greenpeace on why the U.S. should not
sign the Kyoto Protocol.
4) Explain to the city of Las Vegas and the state of Nevada why it is a good idea to take all
nuclear waste in the rest of the country to the site of the nuclear dumpsite at Yucca
Mountain, 90 mile from Las Vegas.
5) Explain and analyze the tradable permits system to the residents of Los Angels County,
California.
6) Discuss, explain and analyze the control of an externality such as emissions in a market-
based system including all three components. Use details in your analysis.
7) Why is the Kyoto Protocol such as controversial agreement? Who is against it and why?
Explain your stance on global climate change.
8) Briefly analyze the case of Environmental Activism at Home Depot.
9) Write a persuasive essay on how other companies can emulate Cummins in using
regulation as an opportunity.
10) What were the main issues in the Emerging Nanotechnology Regulation: Samsung’s
SilverCare Washing Machine case?