Economic Analysis of Environmental Policy Exam Bank
Course Introduction
Economic Analysis of Environmental Policy explores the principles and methods used to evaluate the effectiveness and efficiency of policies addressing environmental issues. The course covers core concepts such as externalities, cost-benefit analysis, market-based approaches (like taxes and tradable permits), and the role of government intervention. Students learn to assess the economic impacts of environmental regulations, consider ethical dimensions, and examine real-world case studies from energy, pollution, and resource management sectors. By integrating theoretical models with policy applications, this course equips students with the analytical tools needed to understand and contribute to contemporary environmental policy debates.
Recommended Textbook
Environmental Economics 4th canadian Edition by Barry C Field
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20 Chapters
402 Verified Questions
402 Flashcards
Source URL: https://quizplus.com/study-set/2979
Page 2
Chapter 1: What Is Environmental Economics
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26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/59238
Sample Questions
Q1) The largest source of anthropogenic greenhouse gas emissions globally comes from
A)electricity generation and heat
B)transportation
C)agriculture
D)coal mining
Answer: A
Q2) Define the three different types of equity employed in environmental economics to help evaluate economic outcomes.
Answer: The three different types of equity employed in environmental economics include horizontal,vertical and intergenerational equity.Horizontal equity considers how people from similar economic circumstances such as rural and urban individuals from the same income bracket are impacted by a policy.Vertical equity considers how people from different economic circumstances such as wealthy and poor individuals living in the same area are impacted by a policy.Finally,intergenerational equity considers how a policy impacts individuals living in the present versus future generations.
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3
Chapter 2: The Economy and the Environment
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16 Verified Questions
16 Flashcards
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Sample Questions
Q1) Land is one of the three components that comprise natural capital.List the other two components discussed in the textbook and give one example of each.
Answer: The other two components of natural capital are natural resource capital and environmental capital (or ecosystems).An example of natural resource capital is water (other possible answers could include minerals and energy stocks,forests or fisheries).An example of environmental capital is the earth's atmosphere (other possible answers could include forests,grasslands,wetlands or some other specific ecosystem).
Q2) Mineral stocks,fisheries and water are all examples of ________.
A)renewable resources
B)non-renewable resources
C)natural resource capital
D)environmental capital
Answer: C
Q3) A living resource can become non-renewable if the rate of harvest exceeds the growth rate of the resource's stock.
A)True
B)False
Answer: True
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Chapter 3: Benefits and Costs, Supply and Demand
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16 Verified Questions
16 Flashcards
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Sample Questions
Q1) Technological progress results in a downward shift of the marginal cost curve.
A)True
B)False
Answer: True
Q2) Suppose there are only three individuals in the market for a certain good.Individual A's inverse demand equation is P = 5 - 1/2Q<sup>D</sup>,individual B's inverse demand equation is P = 20 - Q<sup>D</sup> and individual C's inverse demand equation is P = 4 - 2/3Q<sup>D</sup>.What is the aggregate demand equation for this market?
Answer: First we need to rewrite the individual demand equations with Q<sup>D</sup> on the left hand side so we can horizontally aggregate them.Individual A's demand equation is Q<sup>D</sup> = 10 - 2P,individual B's demand equation is Q<sup>D</sup> = 20 - P and individual C's demand equation is Q<sup>D</sup> = 6 -3/2P.Aggregating these yields the market demand equation:Q<sup>D</sup> = 36 - 9/2P.
Q3) The production function of the firm is its supply curve. The marginal cost curve of the firm represents its supply curve.
A)True
B)False
Answer: False
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5
Chapter 4: Economic Efficiency and Markets
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) Suppose demand for a public park (assume it is a pure public good)for two groups of consumers (A and B)is given by:
Q<sub>A</sub> = 4 - 0.5P
Q<sub>B</sub> = 7 - P
where Q is the number of hectares each group would like to see incorporated into the park.If the marginal cost to provide the park is a constant $3/ha,what is the socially efficient number of hectares for the park?
Q2) External benefits can drive a wedge between the market demand curve and the social marginal WTP curve resulting in a market failure.
A)True
B)False
Q3) Suppose the marginal willingness to pay for a certain good is represented by the equation MWTP = 490 - 0.25Q<sup>D</sup> and the marginal cost of production equation for this good is represented by the equation MC = 40 + 2Q<sup>S</sup>.Assuming these curves capture all market and non-market values,solve for the socially efficient level of output and the net social benefits at this level of output.
Q4) List three causes of market failure and give an example of each.
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Chapter 5: The Economics of Environmental Quality
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) 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.
Q2) 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
Q3) Draw a diagram of the marginal abatement cost curve described by: MAC = 903E.What is the uncontrolled level of emissions? What is the marginal abatement cost of the 10<sup>th</sup> unit of abatement? What is the total abatement cost of 10 units of abatement?
Q4) What is the total damage cost at the socially efficient level of emissions for this industry?
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Page 7
Chapter 6: Frameworks of Analysis
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) When it comes to determining the appropriate environmental project to select,the ________ link(s)benefit-cost analysis to our theoretical model of the economics of the environment.
A)equimarginal principle
B)socially efficient scale
C)social discount rate
D)economies of scale
Q2) A cost-effective project is the one that achieves a given level of benefits at the lowest cost among all the possible project options.
A)True
B)False
Q3) Briefly describe the essential steps in conducting a benefit-cost analysis of a project.
Q4) Compute the discount factors you would need to conduct a benefit-cost analysis of the three sewage treatment options to two decimal places assuming a discount rate of 2%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 2%.What option do you recommend and why?
Q5) List three criticisms that have been made about benefit-cost analysis.
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Chapter 7: Benefit-Cost Analysis: Benefits
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) Preventative expenditures,hedonic estimation,surrogate markets and contingent valuation are all examples of ________.
A)indirect approaches of cost estimation
B)indirect approaches of benefit estimation
C)direct approaches of cost estimation
D)direct approaches of benefit estimation
Q2) The change in consumer surplus resulting from an increase in environmental quality (a public good)can be measured in the same way as the change in consumer surplus for a private good.
A)True
B)False
Q3) List and very briefly discuss the strengths and weaknesses of contingent valuation methods for imputing WTP for environmental amenities.
Q4) If the inverse demand equation for a market good is equal to: P<sup>D</sup> = 1050.5Q<sup>D</sup>.What is the consumer surplus associated with consumption of 20 units of the good?
Q5) List the four methods that can be used to impute willingness to pay for environmental improvements.
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Chapter 8: Benefit-Cost Analysis: Costs
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) A region is considering two sites on which to locate a new wastewater treatment plant.
Site A has been owned by the region for five years and the region initially paid $200,000 for the land.The current market value of the site is $400,000.Site B is land the region would have to purchase for $300,000.What is the social opportunity cost of each site? Based on this,which site should they choose?
Q2) Suppose an industry facing an inverse demand equation equal to P = 400 - 0.5Q faces a new pollution control law that shifts its constant marginal cost of production from C<sub>1</sub> = 80 to C<sub>2</sub> = 100.Compute the social costs of regulation in this industry.
Q3) The social opportunity cost of a new environmental regulation should include the cost of enforcement.
A)True
B)False
Q4) Suppose an industry facing an inverse demand equation equal to P = 120 - 4Q faces a new pollution control law that shifts its constant marginal cost of production from C<sub>1</sub> = 50 to C<sub>2</sub> = 68.Compute the social costs of regulation in this industry.
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Page 10
Chapter 9: Criteria for Evaluating Environmental Policies
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8 Verified Questions
8 Flashcards
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Sample Questions
Q1) Policies that can be readily adapted to new information about damages,technological innovation and changing economic or social conditions are considered ________.
A)morally superior
B)politically expedient
C)fair
D)flexible
Q2) Suppose the government is considering two alternative policies to achieve a target level of emissions for an industry of 2,000 tonnes.Option 1's approach is summarized by the marginal abatement cost curve: MAC<sub>1</sub> = 2,200 - E<sub>1</sub> and Option 2's approach is summarized by the marginal abatement cost curve: MAC<sub>2</sub> = 2,750 - 1.25E<sub>2</sub>.What is the total abatement cost of achieving the target emissions under each policy? Based on this calculation,which of the two policies is the cost-effective choice?
Q3) Enforcement costs are critical to the success of environmental programs and should be included in the overall social costs of the program when evaluating different policy options.
A)True
B)False
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Page 11
Chapter 10: Decentralized Policies: Liability Laws, Property
Rights, Voluntary Action
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) ________ suggest(s)that in the presence of an externality bargaining can achieve the socially efficient equilibrium regardless of the initial allocation of property rights.
A)Liability laws
B)The Coase theorem
C)The legal doctrine of standing
D)The burden of proof
Q2) Suppose both a chemical company and a commercial fishery operate on the same river.According to the Coase theorem the socially efficient level of emissions can be reached through bargaining between the two parties if ________ has the right to use the river.
A)just the chemical company
B)just the fishery
C)either the chemical company or the fishery
D)the regulator
Q3) Illustrate graphically and very briefly explain how the production and consumption of green goods results in lower emissions.
Q4) Define green goods and give two examples of green goods.
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Chapter 11: Command-And-Control Strategies: the Case of Standards
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24 Verified Questions
24 Flashcards
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Sample Questions
Q1) Under ________ the burden is on the ________ to make the right decision about what technology to use.
A)technology-forcing standards;pollution control industry
B)technology-based standards;polluting firms
C)technology-based standards;public regulatory authority
D)emission standards;public regulatory authority
Q2) Standards that take the form of never-exceed levels for specific pollutants in an ambient environment are known as ________.
A)emission standards
B)ambient standards
C)performance standards
D)technology-based standards
Q3) Standards will be cost effective when they equate the level of emissions at each source.
This would only be true in the unlikely event that each source had identical marginal abatement cost functions.
A)True
B)False
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Chapter 12: Incentive-Based Strategies: Emission Charges and Subsidies
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) The incentive to innovate induced by pollution policies is referred to as ________.
A)Coase's theorem
B)the opportunity cost doctrine
C)the Porter hypothesis
D)the double dividend
Q2) Briefly define and explain what is meant by the double dividend of emissions taxes.
Q3) A polluter with MAC = 600 - 5E will emit ________ when faced with an emissions tax of $200 per unit of emissions.
A)400 units
B)160 units
C)80 units
D)40 units
Q4) Briefly discuss the two key differences between incentives to innovate under taxes versus standards.
Q5) If the regulatory authority charged an emission tax of $40 per unit of emissions what is the level of emissions and the total abatement cost of each source? Is the tax cost effective?
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Chapter 13: Incentive-Based Strategies: Transferable Discharge Permits
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15 Verified Questions
15 Flashcards
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Sample Questions
Q1) A polluter will buy a permit if the price is less than or equal to its MAC of controlling emissions.
A)True
B)False
Q2) Transferable emission permit schemes provide the same incentive to invest in R&D to find cheaper methods of reducing emissions as emission taxes that achieve the same level of abatement.
A)True
B)False
Q3) Suppose there are two firms in an industry with marginal abatement cost curves: MAC<sub>A</sub> = 2,400 - 4E<sub>A</sub><sub> </sub>MAC<sub>B</sub> = 1,400 - E<sub>B</sub><sub>
</sub>If the regulator wants to use a transferable emission permit scheme to achieve industry abatement of 50%,how many permits will it need to issue and at what price will they trade? If the firms must buy their permits in an auction calculate the total compliance cost of each firm under this form of regulation.A.Total compliance cost is equal to the firms' total abatement cost plus their permit acquisition costs.
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Page 15
Chapter 14: Federal Water Pollution - Control Policy
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) Under a transferable emission permit scheme,a polluter has an incentive to reveal an excessively high MAC relative to its true MAC.
A)True
B)False
Q2) Individual standards have the same informational requirements as uniform standards.
Individual standards require knowledge of each firm's marginal abatement cost functions as well as the marginal damage cost.
A)True
B)False
Q3) Compare the total social costs and total private compliance costs by source and for the entire industry of a $72 emission tax versus a uniform standard that achieves the same level of industry abatement as the tax.
Q4) When there is uncertainty about the marginal abatement cost curve,the flatter the marginal damage cost curve,the closer a standard or transferable emissions program will be to the socially efficient equilibrium than a tax.
A)True
B)False
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Chapter 15: Federal Air Pollution - Control Policy
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19 Verified Questions
19 Flashcards
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Sample Questions
Q1) In Canada,the government can limit public debate and scientific inquiry into environmental issues because it controls the federal bureaucracy while in the US,independent research is frequently done for Congress helping influence policy.
A)True
B)False
Q2) In the case of Regina v.Crown Zerllerbach Canada,the courts ruled that the federal government had the regulatory power under POGG to require a permit for discharging logging debris in the ocean because marine pollution was deemed a matter of national concern giving them the authority to enact the regulation.
A)True
B)False
Q3) The Canadian process of setting environmental regulations is more cooperative than in the United States.
A)True
B)False
Q4) List the powers granted to the federal government under the Constitution Act that would allow it to enact environmental legislation.
Q5) List the powers granted to the provinces under the Constitution Act.
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Chapter 16: Federal Policy on Toxic and Hazardous Substances
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Sample Questions
Q1) Why have few Canadian policies dealing with water-pollution problems stemming from nonpoint-source emissions been implemented? How might different types of pollution-control policies be employed in the case of nonpoint-source emissions?
Q2) What can we conclude from the results of the Delaware Estuary Water Quality Control Study about the use of technology-based standards (TBS)to achieve high versus low target levels of DO (dissolved oxygen)in the waters of the estuary?
Q3) Ontario's command-and-control program to deal with all types of water pollution is known by the acronym ________.
A)MISA
B)BATEA
C)BPT
D)BAT
Q4) List the three roles the federal government plays in water-pollution regulation.
Q5) Part 2 of the Canada Water Act was successful in reducing ________.
A)biochemical oxygen demand
B)phosphorus levels in the Great Lakes
C)non-point source emissions of agricultural pesticides
D)emissions of dioxins and furans from pulp and paper mills
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Chapter 17: State and Local Environmental Issues
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Sample Questions
Q1) The argument that the marginal abatement costs of existing plants are higher than those of new plants used as a justification for more restrictive emission standards for the former than for the latter is known as ________.
A)cost-effectiveness
B)new-source bias
C)old-source bias
D)the non-degradation dilemma
Q2) Because the Canadian Ambient Air Quality standards are ________,they will not be efficient unless ________ in all regions.
A)uniform;MAC = MDC
B)uniform;TAC = TDC
C)individual standards;MAC = MDC
D)individual standards;TAC = TDC
Q3) Unlike an emission tax,a fuel tax would provide a direct incentive for drivers to worry about their level of emissions thus creating an incentive to lower them.
A)True
B)False
Q4) List the "Big Five" criteria air contaminants to which Canadians are exposed.
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Page 19
Chapter 18: Comparative Environmental Policies
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22 Verified Questions
22 Flashcards
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Sample Questions
Q1) No federal legislation specifically covers toxic waste sites.Instead,the federal approach is based on policy outlined by the Treasury Board,rather than in legislation.List the four principles established by the Treasury Board for dealing with this issue.
Q2) List four potential policies that could be adopted to provide firms with the incentive to reduce their production of hazardous wastes.
Q3) The ________ facilitates coordination among all of the involved governments,the public,and industry to accomplish ________ for 43 contaminated sites around the Great Lakes that require decontamination and ongoing efforts to reduce further discharges.
A)CERCLA;site remediation
B)International Joint Commission;Remedial Action Plans
C)CEPA;orphan site cleanup
D)Federal Contaminated Sites Action Plan;site-specific remediation plans
Q4) The Canadian Environmental Protection Act authorizes the federal government to collect data and research into potentially toxic compounds released into the environment as well as giving it the right to ban discharges of substances that pose a significant danger to human health or the environment.List the key features of CEPA concerning toxic substances.
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Page 20
Chapter 19: Economic Development and the Environment
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24 Verified Questions
24 Flashcards
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Sample Questions
Q1) Under social cost pricing,producers receive price P<sub>1</sub>. Producers will receive price P<sub>3</sub>.
A)True
B)False
Q2) Consumers would increase their rate of recycling if there was a financial incentive for them to reduce the weight of the garbage they are allowed to dispose of every week.
A)True
B)False
Q3) List three recycling policy options and discuss their effectiveness.
Q4) A waste disposal fee is one way to get consumers to recycle household waste at the socially efficient level.
A)True B)False
Q5) When the social cost of waste disposal is not considered,production of a waste-generating good will equal Q<sub>1</sub>.
A)True
B)False
Q6) List the two ways that total materials can be reduced.
Q7) Define the reuse ratio and list three ways it can be increased.
Page 21
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Chapter 20: The Global Environment
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) Canada's implicit carbon tax rates that are below those of the United States but higher than those in Europe.
A)True
B)False
Q2) List the six desirable design features for creating an economically efficient carbon pricing scheme.
Q3) Developing a carbon pricing scheme with stable and predictable emission prices is an important design goal for policymakers to keep in mind.
A)True
B)False
Q4) Biological diversity is a high priority for people who are struggling to get enough resources to achieve some degree of economic security.
A)True
B)False
Q5) It is important to preserve biodiversity because genetic diversity from wild species can add value to agricultural breeding programs.
A)True
B)False
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