Multiple Choice Questions:
1. There has been a downward trend in the United States since 1980 in the air pollution concentrations of
a. Sulfur dioxide.
b. Carbon monoxide.
c. Lead.
d. All of the above.
2. Which of the following makes it difficult to achieve the efficient level of pollution reduction?
a. Property rights are not always well-defined.
b. It is difficult to accurately measure the costs and benefits of pollution.
c. It is difficult to determine the level of pollution that is socially optimal.
d. All of the above.
3. Taxes on the emissions of polluting firms are primarily intended to
a. Encourage firms to reduce product prices.
b. Encourage firms to increase production of output.
c. Raise revenue for general spending needs.
d. Encourage firms to pollute less.
4. An ideal pollution tax
a. Does not affect the quantity of the good produced.
b. Forces a firm to internalize the externality.
c. Causes a polluting firm to increase production to the socially efficient level of output.
d. Leads to a reduction in price to the consumer of the polluting firm’s output.
5. Compliance standards that impose emissions limits on polluters
a. Are a fair and efficient way to reduce pollution since all firms are treated equally.
b. Are likely to reduce pollution at a higher cost than would the imposition of per-unit pollution taxes.
c. Are more efficient than the use of pollution taxes since large polluters are less likely to respond to such taxes than are small polluters.
d. Are likely to reduce pollution at a lower cost than would the use of transferable pollution rights.
6. The reason why cleanup costs are lower when the government mandates pollution taxes rather than compliance standards is that
a. The biggest polluters reduce emissions the most, which is always the lowest cost.
b. All firms reduce pollution an equal amount.
c. Emissions are reduced most by firms that can do so at the lowest cost.
d. The smallest polluters reduce emissions the most, which is more cost effective than if large polluters reduce emissions.
7. If compliance standards are too stringent,
a. The marginal social benefit of pollution reduction may outweigh the marginal social cost of pollution reduction.
b. The marginal social cost of pollution reduction may outweigh the marginal social benefit of pollution reduction.
c. The marginal social cost of pollution reduction will just equal the marginal social benefit from pollution reduction.
d. None of the above is correct.