HOME WORK 3
61.239 Introduction to Environmental Economics
Final Review Questions
April 5, 2004
Definitions: Give definitions for the following terms and an example of the
terms' use.
a.
Marginal Damage Curve
b.
Property
c.
Transfer Coefficient
d.
Externality
e.
Open Access Resource
f.
Public Good
g.
Well Mixed Pollutant
h.
Dynamic Efficiency
I.
Static Efficiency
j.
Discount Factor
k.
Absorptive (Assimulative) Capacity
l.
Cumulative (Stock) Pollutants
m.
Fund (flow) Pollutants
n.
Emission Standard
o.
Emission Charge or Tax
p.
Transferable Discharge Permit
q.
Strict Liability
r.
Negligence
s.
Pareto Optimality
t.
Producer's Surplus
u.
Environmental Quality
v.
Fugitive resource
w.
Damages
x.
Benefit Cost Ratio (give the mathematical
formula)
y.
Transaction Costs
z.
Opportunity Costs
aa. Rate of Time Preference
ab. Nonpoint Source Pollution
ac.
Nonwell Mixed Pollutant
ad. Property Rights
ae. Receptor
af.
Free Rider
ag. Common Property
ah. Private Good
ai.
MAC Curve
aj.
Pollutant
ak.
al.
am.
an.
ao.
ap.
Residuals
Source
Emissions
Intangible costs
Tangible benefits
POGG
Answer the following multiple-choice questions by indicating the best possible
answer or answers for each question.
1.
The movement from an unowned resource to common property
resource to a private property resource is characterized by
a.
b.
c.
d.
2.
A model of perfect competition can be based on the following
assumptions.
a.
b.
c.
d.
3.
Economic agents acting as price takers
producers profit maximizing
perfect or complete information
consumers who are maximizing utility
The equimarginal condition
a.
b.
c.
d.
4.
changes in relative prices.
changes in the environment surrounding the resource.
an inevitable movement from unowned resource to private
property
minimize the social costs to society.
is achieved in a perfect market
assures e*, the socially optimal level of pollution control, is
efficiently achieved
is seen to treat polluters fairly
requires that we know the marginal abatement cost curves
for firms when setting socially efficient standards
Correction for a positive externality generated by a particular
industry would have the following effects if generally adopted.
a.
b.
c.
d.
increase quantity of the industry's output
increase economic profits for the industry in the long run
decrease environmental quality
require government revenues if a subsidy was used to
correct the externality
5.
A property rights structure for a resource based on common
property may have the following characteristics
a.
b.
c.
d.
6.
The conditions that are conducive for use of taxes (emission
charges) for pollution abatement are
a.
b.
c.
d.
7.
access to the resource by the common owners.
regulation on access to the resource, i.e., how much or how
the resource is used.
the ability of one of the common owners to sell his or her
share of the resource.
the ability of one of the off spring of a common owner to
inherit the owner's share of the common resource.
marginal changes in the level of pollution will increase
environmental quality.
where pollution is an unmixed cumulative pollutant.
where government has good information regarding the
environmental damages or a well defined level of pollution.
where taxes can be combined with standards or permits and
act as incentives to limit noncompliance.
In the case of the unmixed Fund pollutant
a.
b.
c.
d.
there needs to be transferable permit markets for all receptors.
government needs to know the transfer coefficient for each
source for each receptor.
with multiple receptors the level of emissions from
transferable discharge permits (TDPs) from one source to
another will be modified by the transfer coefficients of the
two sources.
a TDP system will be less efficient than a tax if the market is
thin.
8.
In the case of the conservative (well mixed) fund pollutant
a.
b.
c.
d.
9.
there needs to be transfer coefficients for transferable
discharge permits to work properly without violating the
overall pollution standard
government needs to know the marginal costs of emissions
control for each firm to regulate at all.
the concept of a receptor is crucial for controlling the
pollutant efficiently.
a transferable permit system will be more efficient than a tax
if the market is thin.
The demand for a good whose manufacture generates a negative externality is
a.
b.
c.
d.
10.
The demand for a good
a.
b.
c.
d.
11.
increased by a subsidy on emissions.
increased by a drop in price of a complimentary good.
affected by an increase in income.
decreased more by use of effluent fees than by the use of a
regulatory standard.
increases when the price of a substitute increases.
is unchanged when producers receive a subsidy .
is unaffected by changes in population.
does not reflect environmental costs resulting from its
production.
A Canadian Prime Minister
a.
b.
c.
d.
has direct veto power like a U.S. President.
heads both the executive and legislative functions of the
Federal government.
sets the legislative agenda.
has less constitutional power than a U.S. President.
12.
The without case in benefit-cost analysis is
a.
b.
c.
d.
13.
Open access property structures usually have the following
characteristics:
a.
b.
c.
d.
14.
not everyone has access to the resource,
the resources involved are fugitive resources.
they are used in all kinds of societies.
they result in the conservation of scarcity rent.
Ex Post regulations
a.
b.
c.
d.
15.
the may differ from what existed before the project or policy.
important because it tells us what the addition to national
income is if we do not adopt the new project or policy.
easy to determine and requires no forecasting of future
events.
important because we need to subtract the net benefits from
this case from those of the new project or policy in order to
determine incremental net benefits.
include tort liability, standards, emission taxes, and transferable discharge permits
are dependent on governmental monitoring programs for
their success
depend on the equal marginal principal
are used where transactions costs are lower.
In the case of negligence
a.
b.
c.
d.
both the injurer (defendant) and the injured party (plaintiff)
have the duty to take precautions against a harm
the injured party can be found liable
the injured party must be fully compensated for this tort
liability standard to be efficient
the injurer must be found to be the proximate cause of the
harm for this tort liability standard to be efficient
16.
Joint and several liability
a.
b.
c.
d.
17.
In a common property resource
a.
b.
c.
d.
18.
bequest value.
option value.
existence value.
improved habitat for wildlife.
The Positive Net Present Value criterion
a.
b.
c.
d.
20.
not everyone has the right to use the resource
ownership is by everyone
there may be protection for overuse of the resource
there are no examples of common property ownership
structures in developed countries
Nonuse values from water pollution abatement include
a.
b.
c.
d.
19.
allows a injured party to go after the deep pockets among
several potential injurers.
aids the injured party where at least one member of a small
group is the injurer but which one is unknown.
can be used with either negligence or strict liability.
just makes a suit a class action.
requires that the present value of net benefits $ 0.
and the benefit-cost ratio yield exactly the same results with
regard to ranking alternatives.
can be used to derive the Benefit-Cost ratio criterion.
gives a value in year zero dollars.
In the case of recycling
a.
b.
c.
d.
the First Law of Thermodynamics holds
its inclusion in the materials balance model does not ultimately reduce residual flow to the environment
it replaces materials that would have to be extracted from
the environment
the Second Law of Thermodynamics does not apply to the
recycling process as long as the sun is included in the
materials balance model of the environment
21.
The environment
a.
b.
c.
d.
22.
falls under both the provincial and federal mandates in the
constitution.
has always received a high priority in Canada since the
Constitutional Act of 1967.
has been thought to have less of a priority with the provinces
then economic growth.
and its protection waxes and wanes with popular opinion in
Canada.
POGG
a.
b.
c.
d.
is the basis for provincial powers under the constitution.
is the basis for the Canadian Environmental Protection Act.
has been ruled unconstitutional by the Canadian Supreme
Court.
is a computer game.