Chapter 14 Chemical producing Firm Located Just Upstream From

87. A chemical-producing firm is located just upstream from an electric power plant. Instead of the more expensive

procedure of burying its wastes, the chemical-producing firm begins dumping its waste into the stream. This

causes increased variable costs for the power plant, which uses water from the stream to cool its turbines. The

chemical producer’s dumping of waste into the stream causes

A. The MC of the chemical firm to shift downward and the MC of the power company to shift upward.

88. A chemical-producing firm is located just upstream from an electric power plant. Instead of the more expensive

procedure of burying its wastes, the chemical-producing firm begins dumping its waste into the stream. This

causes increased variable costs for the power plant, which uses water from the stream to cool its turbines.

89.

For which firm are all costs internalized in Table 28.2?

90.

In Table 28.2, which firm has the lowest absolute level of costs borne directly by the producer?

91.

In Table 28.2, which firm has the greatest difference between social and private costs?

92.

In Figure 28.1, if pollution costs are external, the rate of output will be

93.

In Figure 28.1, if the externality is internalized, the rate of output will be

94.

In Figure 28.1, if the rate of output is 320 units,

95.

In Figure 28.1, emission fees will

96.

Refer to Figure 28.2. Assume this firm initially has marginal costs equal to Private MC1 and is polluting. If

the government decides to use emission charges to reduce pollution, the firm’s MC curve will shift to

97.

Refer to Figure 28.2. If this firm is producing a product that does not generate any externalities, the

allocatively efficient output would occur where

98.

Refer to Figure 28.2. If there were no emissions fees on a firm, its marginal cost curve would be

99. The greenhouse effect is largely caused by

A. The release of carbon dioxide into the atmosphere.

100. CO2 emissions are a

101. The Kyoto Treaty of 1997 on global greenhouse emissions expired in 2012. The treaty did,

however, A.

102. The Kyoto Treaty

A. Specified the amount by which every nation would reduce pollution.

103. In 2007 the United Nations concluded that global warming

104. An In the News article is titled “Air Pollution Kills.” The decrease in the length of human life is an example of

105. An In the News article is titled “Air Pollution Kills.” From a social perspective, this suggests that

106. One World View article titled “Paying to Pollute” reports that the price of a marketable pollution permit in Europe

for a ton of carbon dioxide is about $32. The principal advantage of pollution permits is to

107. An In the News article is titled “Study Finds Net Gain from Pollution Rules.” The optimal amount of

pollution, from an economic perspective,

108. The In the News article titled “Study Finds Net Gain from Pollution Rules” finds that

109. An In the News article is titled “Recycling Wastes Money.” When the government requires specific processes

for reducing pollution, it is using:

110. One In the News article titled ” Recycling Wastes Money ” suggests that the government has decided to

intervene by

111. According to the In the News article, “New Rules Would Cut Thousands of Coal

112. The article “New Rules Would Cut Thousands of Coal Jobs” illustrates that

113. The greenhouse effect represents an external cost.

114. Organic pollution does not represent an external cost.

115. External costs occur only with production and not consumption.

116. There are opportunity costs associated with reducing pollution.

117. The pricing of environmental damage because of pollution is difficult because of intangible losses.

118. The EPA estimates that only 10 percent of the current air and water pollution can be eliminated with known and

available technology.

119. Market incentives do not play a role in pollution behavior.

120. The key to pollution abatement lies in forcing polluters to externalize their pollution costs.

Topic: MARKET INCENTIVES

121. Pollution abatement programs result in lower prices being charged for the polluting firm’s products.

122. In general, technology that reduces pollution will shift both the MC and ATC curves upward.

123. Requiring that a firm engage in pollution abatement tends to reduce the firm’s profits.

124. Firms are highly likely to voluntarily engage in an efficient level of pollution abatement.

125. In general, production and consumption decisions are made by balancing private costs and private benefits.

126. Externalities are generally reflected in market prices.

127. Externalities prevent the market mechanism from achieving the optimal rate of pollution.

128. Pollution will decrease when firms are forced to consider externalities as a production cost.

129. Externalities are a measure of the divergence between social costs and private costs.

130. Private costs are included in social costs.

131. Markets will overproduce goods that generate external costs.

132. External costs occur when people litter.

133. Consumer behavior cannot result in external costs.

134. Direct government regulation is generally preferable to altering market incentives for correcting

pollution problems.

135. An emission charge decreases private marginal cost and encourages greater output.

136. Two strategies for environmental protection are the alteration of market incentives and regulation.

137. If those who cause pollution are expected to bear its burden, then the price of automobiles should increase to

cover the cost of antipollution devices.

TRUE

138. The principal advantage of pollution permits is their incentive to minimize the cost of pollution control.

139. The Clean Air Acts of 1970 and 1990 used command-and-control regulatory standards to reduce air pollution.

140. A totally pollution-free environment is an economically sound social goal.

141. Pollution abatement does not impose opportunity costs on society because a decrease in pollution is desirable.

142. The optimal rate of pollution will be attained when the total benefits received by lowering the pollution level are

equal to the total costs that must be incurred to achieve it.

143. Pollution is a problem for all participants in a market economy, and the burden of reducing pollution should be

shared equally.

144. The United Nations Intergovernmental Panel on Climate Change said that evidence is now unequivocal that

145. Explain why firms do not engage in the efficient amount of environmental protection.

146. Explain the differences between external costs, private costs, and social costs and how the presence of

external costs leads to market failure.

147. Graphically depict market failure in the case where social costs exceed private costs, and show where

social welfare is maximized.

148. Describe the two general strategies for environmental pollution abatement.

149. Explain how a “green tax” reduces pollution.

150. When calculating the costs of environmental cleanup, what factors should be taken into consideration?

Chapter 14 Test Bank Summary