Economics of Sustainability Exam Review
Course Introduction
Economics of Sustainability explores the intersection of economic principles and sustainable development, focusing on how economic policies, market mechanisms, and resource management strategies can be designed to promote environmental stewardship, social equity, and long-term economic viability. The course examines key concepts such as externalities, natural capital, circular economy, and cost-benefit analysis of sustainable practices, while addressing global challenges like climate change, resource depletion, and ecological footprints. Through a combination of theory, case studies, and policy evaluation, students will gain the analytical tools to assess and design economic strategies that balance growth with the preservation of natural resources for future generations.
Recommended Textbook
Environmental Economics and Management Theory Policy and Applications 6th Edition by Scott
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Chapter 1: The Role of Economics in Environmental Management
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Sample Questions
Q1) The discipline concerned with the resource flow from economic activity back to nature is known as natural resource economics.
A)True
B)False
Answer: False
Q2) An important environmental objective is to preserve the variety of distinct species of animals and plants and the variety of ecosystems they inhabit. This is known as
A) biodiversity
B) risk assessment
C) sustainable development
D) pollution prevention
Answer: A
Q3) Runoff from urban streets is an example of nonpoint source pollution.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Modeling the Market Process: a Review of the Basics
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Sample Questions
Q1) If a firm is producing at an output level such that the MR is $550 and the MC is $780,
A) the firm incurs a total loss of $230
B) the firm should contract production because marginal profit is less than zero
C) M is +$230
D) the firm should expand its output level because its total revenue is rising by $550
Answer: B
Q2) Marginal revenue is defined as
A) the accumulated revenue associated with production
B) TR/ Q
C) the change in profit associated with another unit of output produced
D) TC/ Q
Answer: B
Q3) Producers' decisions are modeled through the demand function, and consumers' decisions are captured by the supply function.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Modeling Market Failure
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Sample Questions
Q1) At a competitive equilibrium, M = 0, but at an efficient equilibrium MEC = 0.
A)True
B)False
Answer: False
Q2) The Coase Theorem assumes
A) transactions are costless
B) damages are accessible and measureable
C) both (a) and (b)
D) none of the above
Answer: C
Q3) At an efficient equilibrium, MSB = MSC, which implies that M = MEC.
A)True
B)False
Answer: True
Q4) Property rights are the set of valid claims to a good or resource that allow its use and the transfer of ownership through a sale.
A)True
B)False Answer: True
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Chapter 4: Conventional Solutions to Environmental
Problems: Command-And-Control Approach
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Q1) The sum of all polluters' MACs equals the marginal social cost (MSC) of abatement.
A)True
B)False
Q2) Marginal social benefit (MSB) of abatement can be thought of as the reduction in damages linked to reducing pollution.
A)True
B)False
Q3) Much of the air pollution in Catano, Puerto Rico was linked to a nearby oil refinery.
A)True
B)False
Q4) An ambient standard
A) specifies a pollution limit and lets polluters choose the technology to achieve that limit
B) designates the equipment or control method that must be used to abate pollution
C) assures that the least-cost abatement approach will be used by all polluters
D) none of the above
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Chapter 5: Economic Solutions to Environmental Problems: the Market Approach
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Sample Questions
Q1) Compared to an abatement equipment subsidy, a per-unit subsidy on abatement might be less disruptive to the market because it is defined without any influence as to how abatement is achieved.
A)True
B)False
Q2) In the multiple-polluter case for a pollution permit system, suppose two firms, X and Y, face marginal abatement costs of MAC<sub>X</sub> = 1.2A<sub>X</sub> and MAC<sub>Y</sub> = 0.4A<sub>Y</sub>, respectively. To meet water quality standards, the government issues each firm pollution permits such that each firm must abate 20 units of pollution. If permit trading were allowed,
A) firm X would have an incentive to buy a permit as long as the price were less than $24 B) firm Y would be willing to sell a permit as long as the price were less than $8
C) at a permit price of $22, firm X would have an incentive to buy, but firm Y would have no incentive to sell
D) no trading would take place because neither firm has an incentive to trade based on this model
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Page 7
Chapter 6: Environmental Risk Analysis
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Sample Questions
Q1) Benefit-cost analysis identifies the
A) allocatively efficient level of risk
B) the level of risk at which MSB and MSC of risk reduction are equal
C) both (a) and (b)
D) none of the above
Q2) According to the EPA model of human health risk assessment, the risk assessment phase is comprised of five distinct steps.
A)True
B)False
Q3) The EPA's database of identified environmental hazards is known by the acronym
A) IRIS
B) ISIS
C) RISK
D) IPCC
Q4) According to the textbook application, radon
A) is a naturally occurring hazard
B) is an involuntary risk
C) poses no adverse health threat outdoors
D) all of the above
E) (a) and (b) only
Page 8
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Chapter 7: Assessing Benefits for Environmental Decision Making
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Q1) In modeling the travel cost method, the estimated benefit of improving the environmental quality of a natural resource is captured by the change in consumer surplus associated with a decrease in demand for that resource
A)True
B)False
Q2) Assuming that the marginal social benefit (MSB) of environmental quality is known, then
A) the MSB represents the demand for environmental quality
B) total social benefits (TSB) of abatement, A<sub>1</sub>, can be captured as an area under the MSB up to A<sub>1</sub>
C) incremental benefits are measured as an area under the MSB between the pre- and post-policy abatement levels
D) all of the above
E) none of the above
Q3) An indirect gain to society attributable to environmental policy implementation is referred to as a primary environmental benefit.
A)True
B)False
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Chapter 8: Assessing Costs for Environmental Decision Making
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Sample Questions
Q1) An advantage of the survey approach is that the estimates are derived from external experts.
A)True
B)False
Q2) Labor expenditures associated with carrying out an abatement process are considered to be part of
A) capital costs
B) fixed costs
C) operating costs
D) implicit costs
E) none of the above
Q3) According to the U.S. data presented in the text, the highest proportion of operating and capital abatement costs is on recycling.
A)True
B)False
Q4) Newly proposed controls on GHG emissions from motor vehicles are expected to elevate automobile prices.
A)True
B)False
Page 10
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Chapter 9: Benefit-Cost Analysis in Environmental Decision
Making
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Sample Questions
Q1) The present value of $525 received one year from today, assuming an annual rate of return of 5 percent is
A) $551.25
B) $525
C) $500
D) none of the above
Q2) In order for a policy option to achieve allocative efficiency,
A) PVNB must be maximized
B) PVB must be minimized
C) PVC must be minimized
D) (PVB - PVC) must be minimized
Q3) The term, 1/(1 + r)<sup>t</sup> is known as the discount rate, where r represents the discount factor.
A)True
B)False
Q4) Selecting the social discount rate is among the issues debated in the use of benefit-cost analysis for public policy evaluation.
A)True
B)False
11
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Chapter 10: Defining Air Quality: the Standard-Setting Process
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Sample Questions
Q1) PSD areas
A) must meet the same standards as do nonattainment areas
B) face standards that are necessarily set at an efficient level C) are regions that meet or exceed national ambient air quality standards D) are likely associated with higher MSC than that of nonattainment areas
Q2) Based on the textbook application, in the United Kingdom, A) there are no official air quality standards
B) limit values are defined for some of the same pollutants covered by the U.S. NAAQS C) standards for pollutant levels are set to be equivalent to those in the United States D) none of the above
Q3) According to the textbook application, air quality standards in the United Kingdom are identical to those in the United States.
A)True
B)False
Q4) Stationary sources are those arising at a fixed site, such as power plants or factories.
A)True
B)False
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Chapter 11: Improving Air Quality: Controlling Mobile Sources
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Sample Questions
Q1) The Air Quality Index (AQI) in the United States
A) has no counterpart in other nations
B) uses high values to communicate the highest air quality
C) uses values between 1 and 10 to communicate the extent of toxic air pollution
D) is used by various media outlets to communicate urban air quality
Q2) According to a study conducted by the National Academy of Sciences, a uniform standard imposed on motor vehicles would be more cost-effective than a two-tiered standard.
A)True
B)False
Q3) Under the new GHG emissions standards for mobile sources, light-duty vehicles will have to achieve an average emissions level of 250 grams of carbon dioxide (CO<sub>2</sub>) for model year 2016.
A)True
B)False
Q4) The use of uniform emissions standards on mobile sources generates a cost-effective solution.
A)True
B)False
13
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Chapter 12: Improving Air Quality: Controlling Stationary Sources
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Q1) The Acid Rain Program (ARP) was defined in Title II of the Clean Air Act Amendments of 1990.
A)True
B)False
Q2) The dual-control approach refers to
A) dual trading programs, one for sulfur dioxide and one for nitrogen oxides
B) different standards used in PSD areas versus nonattainment areas
C) the netting program and the offset program
D) state control of existing sources and federal control of new or modified sources
Q3) Which of the following is INCORRECT?
A) Emissions limits in PSD areas are more stringent than those in nonattainment areas
B) New Source Performance Standards are technology-based and defined by the EPA
C) Emissions limits for existing sources are more lenient than for new sources
D) Technology-based standards used to control stationary sources are applied uniformly
Q4) Acid rain is a local pollution problem.
A)True
B)False
Page 14
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Chapter 13: Global Air Quality: Policies for Ozone Depletion and Climate Change
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Sample Questions
Q1) In response to the climate change issue, President Obama
A) pledged to reduce the nation's GHG emissions by 17 percent below 2005 levels by 2020
B) has vetoed all environmental bills that do not include a cap-and-trade program
C) implemented a national carbon tax effective in 2012
D) committed the United States to participating in the EU ETS, starting in 2012
Q2) To help the U.S. achieve its objectives to control ozone depletion, an escalating excise tax was levied on the production of ozone-depleting substances.
A)True
B)False
Q3) Which of the following statements is INCORRECT?
A) The United States is a signatory of the Montreal Protocol.
B) The production of CFCs has been banned in the U.S.
C) Even after the phaseout deadline, the excise tax on CFCs is still in place.
D) Volatile organic compounds (VOCs) are used as a substitute for CFCs.
Q4) During the Bush administration, the United States ratified the Kyoto Protocol.
A)True
B)False
Page 15
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Chapter 14: Defining Water Quality: the Standard-Setting Process
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Sample Questions
Q1) The Clean Water Act's no toxics in toxic amounts goal can be justified on economic grounds.
A)True
B)False
Q2) The interdependence of all water resources is explained by the hydrologic cycle.
A)True
B)False
Q3) An aquifer refers to any water body exposed to the atmosphere.
A)True
B)False
Q4) According to the benefit-cost analysis of the Clean Water Act presented in the text, A) TSB outweigh TSC
B) MSB is equivalent to MSC, suggesting an efficient level of abatement
C) TSC are greater than TSB
D) MSC is larger than the MSB, implying controls are too stringent
Q5) The 1989 Exxon Valdez oil spill is the largest tanker spill in U.S. history.
A)True
B)False
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Chapter 15: Improving Water Quality: Controlling Point and Nonpoint
Sources
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Q1) According to the text application, mercury contamination is relatively easy to control because mercury emissions tend to remain close to the polluting source.
A)True
B)False
Q2) Ultimately, federal subsidies of POTW construction accomplished little in terms of improving waste treatment for the U.S. population.
A)True
B)False
Q3) The technology-based effluent limitations
A) are performance-based standards
B) do not make distinctions based on the age of the industrial facility
C) are applicable only to nonpoint polluting sources
D) have been eliminated from U.S. water quality policy
Q4) A volume-based effluent fee is based on the degree of harm linked to the contaminant released.
A)True
B)False
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Chapter 16: Protecting Safe Drinking Water
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Q1) Secondary maximum contaminant levels (SMCLs) are enforceable drinking water standards that are set to protect public welfare.
A)True
B)False
Q2) The National Primary Drinking Water Regulations (NPDWRs)
A) are applicable to public and private water systems
B) are to be implemented uniformly throughout the United States C) are defined only for microorganisms
D) have been established to protect public welfare.
Q3) The Safe Drinking Water Act Amendments of 1996
A) govern U.S. water quality today
B) established the Drinking Water State Revolving Fund (DWSRF)
C) call for setting drinking water standards that are solely benefit based D) all of the above
E) (a) and (b) only
Q4) Standard setting under the Safe Drinking Water Act Amendments of 1996 ignores benefit-cost analysis.
A)True
B)False
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Chapter 17: Managing Hazardous Solid Waste and Waste Sites
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Q1) A permit system is used to control hazardous waste management at treatment, storage, and disposal facilities (TSDFs).
A)True
B)False
Q2) Standards on treatment, storage, and disposal facilities (TSDFs) are set to achieve allocative efficiency.
A)True
B)False
Q3) The Brownfields Act was passed during the Obama administration and deals with abandoned properties whose redevelopment is compromised by contamination.
A)True
B)False
Q4) Superfund relies in part on strict liability, which means that
a. an individual can be held liable even if negligence is not proven
b. only current waste site owners are liable for damages
c. polluters can be held liable for damages but not waste site owners
d. a single party can be held liable for all damages even if their contribution to damages is minimal
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Chapter 18: Managing Municipal Solid Waste
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Q1) A bag-and-tag system is a type of PAYT program
A)True
B)False
Q2) The demand for MSW services
A) represents the production decisions of firms providing disposal or incineration services
B) would likely be lower for higher income households
C) would tend to be lower for more environmentally aware consumers
D) all of the above
E) none of the above
Q3) EPA's integrated waste management system promotes techniques and programs aimed at recycling, source reduction, combustion, and land disposal, in that order.
A)True
B)False
Q4) In terms of nonhazardous waste, the federal government is responsible for A) every aspect of nonhazardous waste management
B) setting recycling rates for each state
C) establishing markets for recovered MSW
D) setting minimum criteria for sanitary landfills and other land disposal sites
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Chapter 19: Controlling Pesticides and Toxic Chemicals
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Sample Questions
Q1) The negative externality in a pesticide or other chemical market
A) is associated mainly with production of the chemical
B) is primarily a consumption externality
C) should be modeled as a marginal external cost (MEC)
D) is appropriately captured by the MSC function
Q2) The Food Quality Protection Act of 1996
A) amended both TSCA and FIFRA
B) gives particular attention to pesticide risks faced by infants and children
C) establishes several health-based standards to control pesticides in foods
D) none of the above
Q3) Pesticide reregistration refers to a reevaluation of a previously licensed pesticide that is already on the market.
A)True
B)False
Q4) According to the textbook application, the Responsible Care Program was launched in the U.K.
A)True
B)False
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21
Chapter 20: Sustainable Development: International Environmental Agreements
and International Trade
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Q1) The Montreal Protocol and its amendments address the phase out of those chemicals primarily responsible for climate change.
A)True
B)False
Q2) Since the NAFTA was reached in 1992, trade among Canada, Mexico, and the United States has risen, but exports to the United States have declined.
A)True
B)False
Q3) The shape of the Environmental Kuznets Curve reflects the theory that advanced levels of industrial development are linked to higher levels of pollution.
A)True
B)False
Q4) Ocean dumping of certain wastes is prohibited by the London Convention 1972 (LC72) and the 1996 Protocol.
A)True
B)False
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Page 22
Chapter 21: Sustainable Approaches: Industrial Ecology and
Pollution Prevention
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Q1) According to the textbook application, product remanufacturing A) begins with the collection of used products
B) involves the dismantling of used products
C) comprises a small market of less than $5 million in revenues
D) none of the above
E) (a) and (b) only
Q2) A major component of the ISO 14000 standards addresses life cycle assessments.
A)True
B)False
Q3) In the United States, the pollution prevention hierarchy consists of the following A) source reduction
B) reuse/recycling
C) cleaner production
D) all of the above
E) (a) and (b) only
Q4) A systems approach to the flow of materials and energy between industrial processes and the environment is known as a life cycle assessment.
A)True
B)False
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