Environmental Science and Economics
Chapter Exam Questions
Course Introduction
Environmental Science and Economics explores the intricate relationship between ecological systems and economic principles, examining how human activities impact the environment and how economic tools can be used to solve environmental problems. Students will learn about natural resource management, environmental policy, market failures such as externalities, and the cost-benefit analysis of environmental regulations. The course highlights sustainable development, the valuation of ecosystem services, and the role of environmental economics in shaping public policy. By integrating scientific and economic perspectives, students gain a comprehensive understanding of how to address contemporary environmental challenges while considering economic efficiency and social welfare.
Recommended Textbook
Environmental Economics 4th canadian Edition by Barry C Field
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402 Verified Questions
402 Flashcards
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Page 2
Chapter 1: What Is Environmental Economics
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Q1) When we drive our cars,we get the ________ of transportation services,while others experience the detrimental effects such as pollution and congestion which environmental economists refer to as a(n)________.
A)positive externality;negative externality
B)direct benefit;opportunity cost
C)direct benefit;negative externality
D)positive externality;opportunity cost
Answer: C
Q2) The production possibility frontier showing the trade-offs between production of high-carbon goods and environmental quality for a certain region never changes. The PPF for a region can shift inward if the environment degrades over time or it can be shifted outward due to technological advances.
A)True
B)False
Answer: False
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Chapter 2: The Economy and the Environment
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Sample Questions
Q1) The stock of natural and environmental resources that sustain ecosystems,the economy and the well-being of individuals is referred to as ________.
A)renewable resources
B)biological diversity
C)ambient quality
D)natural capital
Answer: D
Q2) When a new production technology is invented that results in production of smaller amounts of residuals per unit of output produced,this is called reducing the ________.
A)damages from production
B)intensity of pollution
C)residuals from production
D)residuals intensity of production
Answer: D
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4
Chapter 3: Benefits and Costs, Supply and Demand
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Q1) Total benefits are equal to total willingness to pay which is equal to the area under the demand curve for a given level of consumption.
A)True
B)False
Answer: True
Q2) Technological progress results in a downward shift of the marginal cost curve.
A)True
B)False
Answer: True
Q3) 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.
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5
Chapter 4: Economic Efficiency and Markets
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Sample Questions
Q1) In the case of an open access resource,a(n)________ takes place due to a lack of
A)externality;regulation
B)free rider problem;property rights
C)market failure;property rights
D)external benefit;rivalry in consumption
Q2) External costs can drive a wedge between the market demand curve and the social marginal WTP curve resulting in a market failure.
External costs drive a wedge between private marginal costs (i.e. ,the market supply curve)and social marginal costs.
A)True
B)False
Q3) If social values are not reflected in the market values determined by the market demand and market supply curves,the competitive market equilibrium output will still be the socially efficient level of output.
A)True
B)False
Q4) List three causes of market failure and give an example of each.
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6
Chapter 5: The Economics of Environmental Quality
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Sample Questions
Q1) Suppose there are three polluting sources with MAC<sub>1</sub> = 750.25E,MAC<sub>2</sub> = 120 - 4E and MAC<sub>3</sub> = 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
Q2) What is the socially efficient level of abatement for this industry?
Q3) For a single,non-accumulative pollutant,when no threshold exists the marginal damage function begins at the origin. When no threshold exists,the very first unit of emissions has an impact on the environment.
A)True
B)False
Q4) What is the total damage cost at the socially efficient level of emissions for this industry?
Q5) What is the total social cost at the socially efficient level of emissions?
Q6) What is the socially efficient level of emissions for this industry?
Q7) What is the total abatement cost at the socially efficient level of emissions?
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Chapter 6: Frameworks of Analysis
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Sample Questions
Q1) Vertical equity treats people in the same circumstances identically. Horizontal equity treats people in the same circumstances identically.
A)True
B)False
Q2) 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 5%.Then conduct the benefit-cost analysis to determine which option the municipality should choose to complete when the discount rate is 5% taking into consideration the uncertainty about population growth.Assume the probability of zero population growth is 75% while the probability of higher population growth is 25%.What option do you recommend and why?
Q3) The social discount rate is similar to the private discount rate except it incorporates a social rate of time preference that reflects the government's cost of borrowing which is typically lower than that of the private sector.
A)True
B)False
Q4) Briefly describe the essential steps in conducting a benefit-cost analysis of a project.
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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Sample Questions
Q1) Changes in productivity,health-care costs,loss of human capital and replacement/restoration of damaged property or businesses 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) List and very briefly discuss the strengths and weaknesses of contingent valuation methods for imputing WTP for environmental amenities.
Q3) It is possible to estimate ________ by considering information about reductions in worker productivity and medical expenditures.
A)demand for health care
B)health damages
C)output losses
D)willingness to pay for hospitals
Q4) The benefits of improved environmental quality come about because of reduced damages.
A)True
B)False
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Chapter 8: Benefit-Cost Analysis: Costs
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Sample Questions
Q1) The social opportunity cost of a new environmental regulation should include the cost of enforcement.
A)True
B)False
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) Suppose a manufacturing firm that is about to be regulated faces the following actual and potential production costs: 1)$2,500 before regulation;2)$2,925 in the future without the regulation;and 3)$3,240 in the future with the regulation.The before/after cost of the regulation is ________ and the with/without cost of the regulation is
A)$425;$740
B)$425;$315
C)$740;$315
D)$315;$425
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Page 10
Chapter 9: Criteria for Evaluating Environmental Policies
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Q1) If the marginal abatement cost of a policy is represented by: MAC = 1,400 - 5E,the total abatement cost when the target level of emissions is 200 units equals ________.
A)$400
B)$80,000
C)$32,000
D)$16,000
Q2) 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
Q3) Moral objections to the use of effluent subsidies to help firms reduce their emissions arise from the idea that ________.
A)the polluter should pay
B)subsidies are politically unpalatable
C)subsidies can never be cost-effective
D)effluent taxes work better than subsidies
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11
Chapter 10: Decentralized Policies: Liability Laws, Property
Rights, Voluntary Action
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Q1) When a good is an open-access resource,the free-rider problem effectively defeats the chances that a socially efficient equilibrium can be achieved through property rights assignments and bargaining.
A)True
B)False
Q2) Define green goods and give two examples of green goods.
Q3) ________ 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
Q4) Goods that give the same level of pleasure as ordinary goods but that involve less environmental damage in either their production,use or disposal are known as
A)generic goods
B)luxury goods
C)green goods
D)environmental goods
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Chapter 11: Command-And-Control Strategies: the Case of Standards
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Q1) What are the socially efficient individual standards for carbon monoxide? What is the total abatement cost in each area under this scheme?
Q2) In order to set individual standards in accordance with the equimarginal principle,regulators would have to know the marginal abatement cost relationship for each polluting source.
The informational requirements to set cost-effective standards are very high.
A)True
B)False
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
Q4) Technology-based standards provide firms with no incentive to find cheaper ways to reduce their emissions.
A)True
B)False
Page 13
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Chapter 12: Incentive-Based Strategies: Emission Charges and Subsidies
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Q1) If the regulatory authority charged an emission tax of $20 per unit of emissions what is the level of emissions and the total abatement cost of each source? Is the tax cost effective?
Q2) For an industry with MAC = 400 - 4E and MDC = 4E,calculate the socially efficient tax rate.What are the net social benefits of the socially efficient tax?
Q3) Emission taxes provide less incentive for firms to conduct R&D to find cheaper ways to reduce emissions than standards. A)True B)False
Q4) If the regulatory authority charged an emission tax of $30 per unit of emissions what is the level of emissions and the total abatement cost of each source? Is the tax cost effective?
Q5) If the regulatory authority charged an emission tax of $50 per unit of emissions what is the level of emissions and the total abatement cost of each source? Is the tax cost effective?
Q6) Briefly discuss the two key differences between incentives to innovate under taxes versus standards.
Page 14
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Chapter 13: Incentive-Based Strategies: Transferable Discharge Permits
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Q1) Transferable emission permit programs work best if there is little competition among buyers and sellers of permits.
A)True
B)False
Q2) The ________ established an innovative permit-trading scheme for the control of airborne SO<sub>2</sub> emissions in ________.
A)1990 Clean Air Act Amendments;Canada
B)1990 Clean Air Act Amendments;the United States
C)Canadian Environmental Protection Act;Canada
D)Cross-State Air Pollution Rule;the United States
Q3) If the government regulator has chosen a target level of total emissions to be 400 units per year,________ permits will need to be issued and they will trade for ________ per permit.
A)100;$200
B)100;$120
C)400;$200
D)400;$120
Q4) Briefly explain why firms have an incentive to monitor each other's permit usage under a transferable emission permit scheme.
Page 15
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Chapter 14: Federal Water Pollution - Control Policy
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Q1) When there is uncertainty about the marginal abatement cost curve and the marginal damage cost curve is ________,a transferable emission permit or a standard equal to the ________ is the socially efficient policy.
A)horizontal;socially efficient level of emissions
B)horizontal;marginal damages
C)vertical;socially efficient level of emissions
D)vertical;socially efficient level of abatement
Q2) 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.
Q3) When there is uncertainty about the marginal abatement cost curve andthe marginal damage cost curve is ________,a tax equal to the ________ is the socially efficient policy.
A)horizontal;socially efficient level of emissions
B)horizontal;marginal damages
C)vertical;marginal abatement cost
D)vertical;marginal damages
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Chapter 15: Federal Air Pollution - Control Policy
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Q1) Which of the following is NOT a power granted by the Constitution to the provinces?
A)powers over local works
B)powers over provincially owned lands and resources
C)powers over property and civil rights within provinces
D)powers over interprovincial trade
Q2) Environment Canada was created in 1971 combining a number of federal agencies that had environmental responsibilities.
A)True
B)False
Q3) In the United States,the process for setting standards and designing regulations is far more informal,discretionary and closed than in Canada.
A)True
B)False
Q4) What are the two types of problems that originate from the Canadian Constitution and our federal/provincial system of government regarding the setting of environmental policy?
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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Q1) 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
Q2) Trading of emission reduction credits between point sources and nonpoint sources of phosphorus in Ontario's South Nation River watershed has been successful at reducing phosphorus without the need for upgrades to water treatment facilities.
A)True
B)False
Q3) The provinces and federal government through the Canadian Council of Ministers of the Environment have established binding standards for Canadian drinking water. These are non-binding guidelines only.
A)True
B)False
Q4) 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?
Page 18
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Chapter 17: State and Local Environmental Issues
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Q1) Acid rain was a challenging transboundary issue for Canada and the United States to tackle because ________.
A)scientific information about damages took time to be established
B)the distribution of benefits and costs of reducing SO<sub>2</sub> emissions were unequal across and within the jurisdictions
C)many levels of government were involved
D)all of the choices are correct
Q2) Under the ________,________ is to design the program for managing air quality in Canada,and then turn the monitoring,enforcement,and reporting operations of the program over to the provinces and territories.
A)National Ambient Air Quality Objectives;the CCME
B)Air Quality Management System;the CCME
C)Clean Air Act;Environment Canada
D)Air Quality Management System;Environment Canada
Q3) Governments may inadvertently slow up the rate of adoption of new pollution-abatement technologies through the use of new-source bias in the setting of emission standards.
A)True
B)False
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Page 19
Chapter 18: Comparative Environmental Policies
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Q1) Because dioxans and furans ________ the impact of banning these substances on environmental quality is ________.
A)biodegrade;uncertain
B)biodegrade;a success story
C)bioaccumulate;uncertain
D)bioaccumulate;a success story
Q2) 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
Q3) List four potential policies that could be adopted to provide firms with the incentive to reduce their production of hazardous wastes.
Q4) Provide a brief critical assessment of the Canadian Environmental Protection Act.
Q5) What is CERCLA and what are the main features of this program?
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Chapter 19: Economic Development and the Environment
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Sample Questions
Q1) A tax on virgin materials would lead firms to increase their recycling ratios.
A)True
B)False
Q2) Define the reuse ratio and list three ways it can be increased.
Q3) Taxing production is one way to get firms to produce the socially efficient level of a waste-generating good.
A)True
B)False
Q4) A per unit tax equal to P<sub>1</sub> - P<sub>3</sub> would result in firms producing the socially efficient level of a waste-generating good.
A)True
B)False
Q5) When the social cost of waste disposal is not considered,consumption of a waste generating good will equal Q<sub>2</sub>.
Consumption will equal Q<sub>1</sub> when the social costs are not considered.
A)True
B)False
Q6) List two ways that material intensity can be reduced and give an example of each.
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Chapter 20: The Global Environment
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Q1) If permits are distributed through an auction,governments can recycle the revenue in the form of tax cuts to offset some losses experienced by firms.
A)True B)False
Q2) A transferable emission permit scheme will always be superior to an emission tax when it comes to developing an economically efficient carbon pricing scheme.
A)True B)False
Q3) Discuss the factors that helped make the Montreal Protocol a successful international treaty.
Q4) Habitat maintenance is not essential for preserving biodiversity because breeding programs at zoos and agricultural research stations are adequate for this purpose. A)True B)False
Q5) List four design principles that economists recommend for setting up a cap-and-trade system.
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