Clicker Review

1. Clicker Review

2. 1 A marginal damage function represents • the costs associated with reducing pollution to a lower level • the increase in damage that results from an increase in the level of pollution • the opportunity costs associated with production of a good or service • the costs of labor, capital and energy needed to lessen the emission of pollution

3. 2 A marginal abatement cost function represents • the costs associated with reducing pollution to a lower level • the increase in damage that results from an increase in the level of pollution • the opportunity costs associated with production of a good or service • the costs of labor, capital and energy needed to lessen the emission of pollution • both (a) and (d)

4. 3 If society is composed of two polluters, with the MAC of polluter 1 and 2 given by the following equations: MAC1 = 18 – E1 MAC2 = 12 – 2E2the unregulated level of pollution for each polluter is • 18 units by polluter 1 and 6 units by polluter 2 • 9 units by polluter 1 and 12 units by polluter 2 • 4 units by polluter 1 and 4 units by polluter 2 • 18 units by polluter 1 and 12 units by polluter 2

5. 4 Given the following MD and MAC functions: MD = 3E MAC = 120 – 2Ethe optimal level of pollution emissions (E) for society is • 0 • 24 • 60 • 90 • 120

6. 5 The optimal level of pollution abatement across two firms is • a mandated reduction of equal quantities by each firm • a reduction of emission levels by each firm to the point where marginal abatement costs are equal across firms • a reduction of emission levels by each firm to the point where emission levels are equal • any of the above

7. 6 The the discount rate used in computing a cost-benefit analysis, the the weight placed on future benefits and costs. • lower; lower • higher; higher • higher; lower • none of the above

8. 7 The indirect technique based on a theory of consumer behavior which says that people value a good because they value the characteristics of a good is • Travel cost method • Contingent value method • Hedonic pricing method • Heimlich maneuver

9. 8 The travel cost method is based on the premise that • A survey of individuals at different recreational sites will provide information about the appropriate level of pollution at those sites • Travel cost to a site can be regarded as the price of access to the site • That individual measurements of consumer surplus can be used to generate an average value associated with a specific recreational site • Both (b) and (c)

10. 9 If, on average, truck drivers are willing to accept a 1/2000 annual risk of death if their income increases by $5000 annually, what is the collective willingness to be compensated to accept the loss of life? • $2 million • $5 million • $10 million • $12 million

11. 10 The contingent valuation method for estimating benefits suffers from • Hypothetical bias • Strategic bias • Free-riding • All of the above.

12. 11 The next three questions refer to the following, a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. Option C : • is the safest • Is the least efficient • Is the most efficient • Has the lowest net benefits.

13. 12 The following is a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. The marginal cost of tightening the standard from option C to option B: • Is $2.3m • Is $0.7m • Is $0.9m • Is $2.2m • Is $2.4m

14. 13 The following is a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. If a 3% discount rate had been used: • both total costs and total benefits of all three options would be larger • both total costs and total benefits of all three options would be smaller • the efficient option would have to stay the same • total benefits would be larger for all three options, but total costs would remain unchanged • the table would be unchanged