Environmental Economics 4Th Canadian Edition By Field - Test Bank

Environmental Economics 4Th Canadian Edition By Field – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 05

The Economics of Environmental Quality

 

 

Multiple Choice Questions

1. Determining a target level of environmental quality is an example of _______.
   A.positive policy analysis
   B. positive economics
   C. normative policy analysis
   D. benefit-cost analysis

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Distinguish between positive and normative economics.

2. For certain pollutants with a(n) _______, emissions or ambient quality up to a certain level cause _________ damages.
   A.threshold; no
   B. ambient concentration; no
   C. threshold; severe
   D. ambient concentration; severe

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Define the marginal damage function and distinguish among four different shapes and what each means.

3. A marginal damage function that becomes vertical at high levels of emissions represents _______.
   A.a threshold
   B. an infinite ambient concentration
   C. a toxic pollutant
   D. an environmental catastrophe

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Define the marginal damage function and distinguish among four different shapes and what each means.

 

 

4. A(n) ________ shows how damages are related to the concentration of a waste product contained in the ambient environment.
   A.emission damage function
   B. ambient damage function
   C. marginal damage function
   D. ambient concentration

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Define the marginal damage function and distinguish among four different shapes and what each means.

5. For a marginal damage cost function equal to: MD = 0.8E, the marginal damage cost of the 50^th unit of emissions is _______.
   A.$4
   B. $40
   C. $1,000
   D. $2,000

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-03 Distinguish between marginal and total damages and illustrate their derivation graphically.

 

 

6. In the following figure, the marginal damage cost of the 25^th unit of emissions is equal to _______.

   A. $10
   B. $25
   C. $125
   D. $250

 

Difficulty: Easy
Learning Objective: 05-03 Distinguish between marginal and total damages and illustrate their derivation graphically.

 

 

7. In the following figure, the total damage cost of 25 units of emissions is equal to _______.

   A. $10
   B. $125
   C. $250
   D. $625

 

Difficulty: Easy
Learning Objective: 05-03 Distinguish between marginal and total damages and illustrate their derivation graphically.

 

 

8. In the following figure, the uncontrolled level of emissions is _______.

   A. 80
   B. 40
   C. 160
   D. impossible to determine from the information provided

 

Difficulty: Easy
Learning Objective: 05-04 Interpret the meaning of the marginal abatement cost curve and illustrate graphically the distinction between marginal and total costs of abatement.

 

 

9. In the following figure, the marginal abatement cost of abating the 20^th unit of emissions is _______.

   A. $40
   B. $200
   C. $400
   D. impossible to determine from the information provided

 

Difficulty: Easy
Learning Objective: 05-04 Interpret the meaning of the marginal abatement cost curve and illustrate graphically the distinction between marginal and total costs of abatement.

 

 

10. In the following figure, the total abatement cost of abating 20 units of emissions is _______.

    A. $40
    B. $400
    C. $800
    D. impossible to determine from the information provided

 

Difficulty: Easy
Learning Objective: 05-04 Interpret the meaning of the marginal abatement cost curve and illustrate graphically the distinction between marginal and total costs of abatement.

11. Suppose there are three polluting sources with MAC₁ = 100 – 4E, MAC₂ = 80 – 2E and MAC₃ = 60 – 0.5E. When MAC equals $10, the aggregate level of abatement for these sources would be _______.
    A.175 units
    B. 157.5 units
    C. 212.5 units
    D. impossible to determine from the information provided

 

Accessibility: Keyboard Navigation
Difficulty: Moderate
Learning Objective: 05-05 Show graphically how to aggregate marginal abatement cost curves.

 

 

12. Suppose there are three polluting sources with MAC₁ = 75 – 0.25E, MAC₂ = 120 – 4E and MAC₃ = 50 – 0.5E. When MAC equals $20, the aggregate level of abatement for these sources would be _______.
    A.impossible to determine from the information provided
    B. 150 units
    C. 305 units
    D. 555 units

 

Accessibility: Keyboard Navigation
Difficulty: Moderate
Learning Objective: 05-05 Show graphically how to aggregate marginal abatement cost curves.

13. For a firm with more than one source of output with differing cost structures, its ________ will be minimized when its ________ are equalized across sources.
    A.marginal production costs; production levels
    B. total production costs; production levels
    C. total production costs; marginal production costs
    D. marginal production costs; total production costs

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-06 Explain the equimarginal principle and how it applies to marginal abatement costs.

14. For a firm with more than one source of emissions, the ________ states that the total costs of abating a given abatement target will be minimized when the marginal costs of abatement are ________ across sources.
    A.equimarginal principle; equalized
    B. law of one price; equalized
    C. equimarginal principle; minimized
    D. Coase theorem; equalized

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-06 Explain the equimarginal principle and how it applies to marginal abatement costs.

 

 

15. Under what circumstances would a firm with more than one source of emissions minimize its total costs of abatement by setting abatement levels equal at each source?
    A.This method will always result in the firm minimizing its total abatement costs.
    B. When each source has identical marginal cost of production structures.
    C. When each source has identical marginal abatement cost structures.
    D. When each source has identical marginal damage cost structures.

 

Accessibility: Keyboard Navigation
Difficulty: Moderate
Learning Objective: 05-06 Explain the equimarginal principle and how it applies to marginal abatement costs.

16. Under what circumstances would a firm with more than one source of production minimize its total costs of production by setting production levels equal at each source?
    A.This method will always result in the firm minimizing its total production costs.
    B. When each source has identical marginal cost of production structures.
    C. When each source has identical marginal abatement cost structures.
    D. When each source has identical marginal damage cost structures.

 

Accessibility: Keyboard Navigation
Difficulty: Moderate
Learning Objective: 05-06 Explain the equimarginal principle and how it applies to marginal abatement costs.

 

 

True / False Questions

17. The study of what ought to be such as determining the socially efficient level of emissions is known as normative economics.
    TRUE

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Distinguish between positive and normative economics.

18. Describing and explaining economic events that have taken place in the real world is known as positive economics.
    TRUE

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-01 Distinguish between positive and normative economics.

19. For a single, non-accumulative pollutant, when no threshold exists the marginal damage function begins at the origin.
    TRUE

When no threshold exists, the very first unit of emissions has an impact on the environment.

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-02 Define the marginal damage function and distinguish among four different shapes and what each means.

20. 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.
    TRUE

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-03 Distinguish between marginal and total damages and illustrate their derivation graphically.

 

 

21. The least costly way of achieving reductions in emissions for a group of polluting sources is depicted by the aggregate marginal abatement cost function of the group of sources.
    TRUE

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-05 Show graphically how to aggregate marginal abatement cost curves.

22. The equimarginal principle can only be applied at the level of one firm with multiple plants all producing the same good and pollutant.
    FALSE

 

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 05-06 Explain the equimarginal principle and how it applies to marginal abatement costs.

 

 

Short Answer Questions

23. Briefly define positive and normative economics and give an example of each concept.

Positive economics studies “what is” by describing or explaining events that actually occur in the real world. An example of positive economics is the analysis of market data on actual prices and sales volumes of a particular good (many other examples are possible here). Normative economics studies “what ought to be” such as what the outcome of the economy or public policy ought to be in order to satisfy a certain goal (eg., fairness, social efficiency, etc.). An example of normative economics is designing an environmental policy that treats people of different income levels fairly (again numerous other examples are possible).

 

Difficulty: Easy
Learning Objective: 05-01 Distinguish between positive and normative economics.

 

24. Draw a diagram of the marginal abatement cost curve described by: MAC = 100 – 2E. What is the uncontrolled level of emissions? What is the marginal abatement cost of the 40^th unit of abatement? What is the total abatement cost of 40 units of abatement?

The diagram below shows the function described by: MAC = 100 – 2E.

To find the level of uncontrolled emissions, set MAC = 0 and solve for E:
0 = 100 – 2E
E = 100/2 = 50
To find the MAC of the 40^th unit of abatement, we first need to determine the level of emissions associated with this amount of abatement. Current emissions will equal uncontrolled emissions minus the level of abatement:
E = 50 – 40 = 10 units of emissions remaining
Now solve for MAC by substituting E = 10 into the MAC equation:
MAC = 100 – 2(10) = $80.
The TAC of 40 units of abatement will equal the area under the MAC from E = 10 to E = 50 which is the area of a triangle with height 80 and width of 40 (area A in the diagram below):
TAC = ½(80 ´ 40) = $1,600

 

Difficulty: Moderate
Learning Objective: 05-04 Interpret the meaning of the marginal abatement cost curve and illustrate graphically the distinction between marginal and total costs of abatement.

 

25. Draw a diagram of the marginal abatement cost curve described by: MAC = 90 – 3E. What is the uncontrolled level of emissions? What is the marginal abatement cost of the 10^th unit of abatement? What is the total abatement cost of 10 units of abatement?

The diagram below shows the function described by: MAC = 90 – 3E.

To find the level of uncontrolled emissions, set MAC = 0 and solve for E:
0 = 90 – 3E
E = 90/3 = 30
To find the MAC of the 10^th unit of abatement, we first need to determine the level of emissions associated with this amount of abatement. Current emissions will equal uncontrolled emissions minus the level of abatement:
E = 30 – 10 = 20 units of emissions remaining
Now solve for MAC by substituting E = 20 into the MAC equation:
MAC = 90 – 3(20) = $30.
The TAC of 10 units of abatement will equal the area under the MAC from E = 20 to E = 30 which is the area of a triangle with height 30 and width of 10 (area A in the diagram below):
TAC = ½(30 ´ 10) = $150

 

Difficulty: Moderate
Learning Objective: 05-04 Interpret the meaning of the marginal abatement cost curve and illustrate graphically the distinction between marginal and total costs of abatement.

 

26. Let MAC₁ = 80 – 2E and MAC₂ = 50 – E. Graph each function and graphically derive the aggregate MAC curve.

The following table summarizes the abatement that will take place at each MAC level and the total for each MAC level.

The first panel shows the individual sources’ MAC curves. Source 1’s MAC is represented by the blue line and Source 2’s MAC is represented by the red line. The second panel shows the aggregate MAC curve (the green line). Note the kink at MAC = $50.

 

Difficulty: Moderate
Learning Objective: 05-05 Show graphically how to aggregate marginal abatement cost curves.

 

 

The following diagram presents the marginal damage cost (MDC) and marginal abatement cost (MAC) curves for a particular industry.

 

27. What is the socially efficient level of emissions for this industry?

The socially efficient level of emissions can be found where the marginal damage cost equals the marginal abatement cost. Set the two equations equal to solve for E*:

200 + E = 900 – 0.75E
1.75E = 700
E = 700/1.75 = 400 = E*
The socially efficient level of emissions is equal to 400 units.

 

Difficulty: Easy
Learning Objective: 05-07 Illustrate graphically the determination of a socially efficient level of pollution and how this equilibrium minimizes net social costs compared to no emission control.

 

 

28. What is the socially efficient level of abatement for this industry?

The socially efficient level of abatement is found by subtracting the socially efficient level of emissions from the level of uncontrolled emissions. Uncontrolled emissions can be found where MAC = 0:

0 = 900 – 0.75E
E₀ = 900/0.75 = 1,200
A* = E₀ – E* = 1,200 – 400 = 800 units
The socially efficient level of abatement is equal to 800 units.

 

Difficulty: Moderate
Learning Objective: 05-07 Illustrate graphically the determination of a socially efficient level of pollution and how this equilibrium minimizes net social costs compared to no emission control.

29. What is the total damage cost at the socially efficient level of emissions for this industry?

The total damage cost when emissions equals 400 units is the area under the marginal damage cost curve. When E = 400, MDC = 200 + E = 600. The area under the MDC curve will be the area of a rectangle with height of 200 and width of 400 and a triangle with height of 400 and a width of 400 yielding:

TDC = 200 ´ 400 + ½ (400 ´ 400) = 80,000 + 80,000 = $160,000.
The total damage cost at the socially efficient level of emissions is $160,000.

 

Difficulty: Moderate
Learning Objective: 05-07 Illustrate graphically the determination of a socially efficient level of pollution and how this equilibrium minimizes net social costs compared to no emission control.

 

 

30. What is the total abatement cost at the socially efficient level of emissions?

The total abatement cost at the socially efficient level of emissions is equal to the area under the marginal abatement cost curve from emissions of 400 to emissions of 1,200 (this distance represents the abatement of 800 units). When emissions are 400, MAC = 900 – 0.75(400) = 600. Total abatement cost is going to be the area of a triangle with height of 600 and base of 800:

TAC = ½ (800 ´ 600) = $240,000
The total abatement cost at the socially efficient level of emissions is $240,000.

 

Difficulty: Easy
Learning Objective: 05-07 Illustrate graphically the determination of a socially efficient level of pollution and how this equilibrium minimizes net social costs compared to no emission control.

31. What is the total social cost at the socially efficient level of emissions?

The total social cost at the socially efficient level of emissions is equal to the sum of the TDC and the TAC:

TSC = 160,000 + 240,000 = $400,000
The total social cost at the socially efficient level of emissions is $400,000. At any other level of emissions, the TSC will be higher than the TSC at the social optimum.

 

Difficulty: Easy
Learning Objective: 05-07 Illustrate graphically the determination of a socially efficient level of pollution and how this equilibrium minimizes net social costs compared to no emission control.