Verified Test Bank Ch12 Incentive-Based Strategies Emission

Chapter 12

Incentive-Based Strategies: Emission Charges and Subsidies

Multiple Choice Questions
 

1. There are two types of incentive based environmental policies
A. market-based systems and technology standards.
B. market-based systems and taxes/subsidy programs.
C. taxes/subsidy programs and technology standards.
D. technology standards and emissions standards.

 Difficulty: Easy

2. Which of the following is an example of a market based system for pollution control? 
A. Taxes on emissions
B.  Subsidies for abatement
C. Transferable discharge permits
D. Deposit refund programs

Difficulty: Easy

 

3. Emission charges is a term that is synonymous with ________________.
A. emission subsidies
B. emission taxes
C. emission prices
D. emission permits

 
Difficulty: Easy

4. Refer to the Table above. The firm above faces an emissions charge of $100 per ton/month. If the firm chooses to emit 5 tons/month what is the firm’s total cost?
A. $265
B. $600
C. $765
D. $865

Difficulty: Moderate
 

5. Refer to the Table above. The firm above faces an emissions charge of $100 per ton/month. If the firm chooses to emit 0 tons/month what is the firm’s total cost? 
A. $290
B. $1290
C. $2235
D. $1240

 Difficulty: Moderate

 

6. Refer to the Table above. The firm above faces an emissions charge of $100 per ton/month. At what level of emissions does the firm minimize total abatement cost?
A. 10
B. 5
C. 4
D. 0

Difficulty: Moderate

7. Refer to the Table above. If the firm above faced an emissions charge of $150 per ton/month, at what level of emissions does the firm minimize total abatement cost? 
A. 3
B. 4
C. 5
D. 8

 Difficulty: Moderate 

8. Refer to the Table above. If a regulatory agency simply mandated that the firm could emit a maximum of 5 tons/month and there were no emission charges, what would the firm’s total abatement costs be?
A. $100
B. $265
C. $500
D. $765

Difficulty: Moderate

9. Which of the following statements about abatement subsidies is NOT true? 
A. Environmental groups dislike abatement subsidies because they appear to reward polluters.
B. Governments like abatement subsidies because they are relatively inexpensive to implement.
C. Abatement subsidies are popular with firms.
D. Abatement subsidies create perverse incentives for firms to increase emissions when their base levels are being set.

Difficulty: Easy

 10. Which of the following statements is true? 
A. Polluting firms would prefer emission standards to emission charges.
B. Polluting firms would prefer emission charges to emission standards.
C. In order to arrive at a socially efficient solution, we must use emission standards and not emission charges.
D. None of the above are true.

 
Difficulty: Easy

 

11. Refer to the Figure above. If the firm above faced an emissions charge of $ t* per ton/month, at what level does the firm reach a socially efficient solution for emissions? 
A. 0
B. e₁
C. e^*
D. e₀

 Difficulty: Easy. 

12. Refer to the Figure above. If the firm above faced an emissions charge of $ t* per ton/month and the firm is producing at the socially efficient level of emissions, what is the value of the total abatement cost?
A. t* (a+b+c+d)
B. (a+b+c+d+e)
C. (a+b+c+d)
D. (b+d+e)

Difficulty: Moderate

13. Refer to the Figure above. If the firm above faced an emissions charge of $ t* per ton/month, what is the amount of taxation collected? 
A. t* (a+b+c+d)
B. (a+b+c+d+e)
C. (a+b+c+d)
D. (b+d+e)

 Difficulty: Moderate 

14. Refer to the Figure above. If the firm above did not face emissions charges but instead, faced an emission standard of e*, abatement costs would be equal to ____________.
A. (b+d+e+f)
B. (e)
C. (a+b+c+d)
D. (b+d+e)

Difficulty: Moderate

15. Refer to the Figure above If this firm were to consider the difference between an emission tax of t* or an emissions standard of e*, what would the firm conclude is the monetary difference between the two programs?
A. The emissions standard costs less than the taxation program by the amount of (a+b+c+d).
B. The emissions standard costs more than the taxation program by the amount of (a+b+c+d).
C. There is no monetary difference between the two programs.
D. There is not enough information to determine the difference between the two programs.

 
Difficulty: Moderate

16. Pollution taxes are transfer payments. This means

A. they are not a cost to the firm.
B. they are not a social cost of policy.
C. the costs associated with collection are not considered enforcement costs.
D. all of the above.

 
Difficulty: Easy

17. When multiple firms are emitting, an emissions tax controls emissions in a way that
A. satisfies the equimarginal principle.
B. encourages firms to emit to the point where there marginal abatement cost equals the tax.
C. equalizes marginal abatement costs across all firms.
D. all of the above.

Difficulty: Moderate

TABLE 1

Marginal abatements costs ($/ton)

Emissions (tons/week) Firm 1 Firm 2 Firm 3

10 $0 $0 $0

9 4 1 1

8 8 2 2

7 12 4 3

6 16 6 4

5 20 8 5

4 24 12 6

3 28 20 7

2 36 24 8

1 46 28 9

0 58 36 10

18. Refer to Table 1. If the firms above faced an emissions tax of $8, what level of total emissions would occur?
A. 12
B. 15
C. 100
D. 127

Difficulty: Easy

19. Refer to Table 1. If the firms above faced an emissions tax of $8, what level of total abatement costs would be expended?
A. $69
B. 24
C. $24 in abatement costs and $24 in taxes
D. $45 in abatement costs and $24 in taxes

Difficulty: Moderate

20. Refer to Table 1. If the firms above faced an emissions tax of $12, what level of total emissions would occur?
A. 11
B. 21
C. 83
D. 138

Difficulty: Moderate

21. Refer to Table 1. If the firms above faced an emissions tax of $12, what level of total abatement costs would be expended?
A. 33
B. 57
C. $36 in abatement costs and $36 in taxes
D. $21 in abatement costs and $36 in taxes

Difficulty: Moderate

22.  Emissions taxes lead to
A. a larger reduction in emissions from firms with lower abatement costs.
B. a larger reduction in emissions from firms with higher abatement costs.
C. an equal distribution of emissions reductions among firms with different abatement costs.
D. a different emission tax applied to firms depending on their abatement costs.

Difficulty: Easy

23.  Efficiency results of emissions taxes are achievable
A. if regulators know the structure of each emitting firm’s abatement cost curve.
B. even if regulators do not know the structure of each emitting firm’s abatement cost curve.
C. only when each emitting firm experiences the same abatement cost curve.
D. both A and C.

Difficulty: Easy

24.  When emissions are nonuniform and some sources produce higher damages than others
A. uniform emissions charges produce efficient levels of emissions.
B. firms that produce greater damages must be charged higher emissions charges in order to secure efficient levels of emissions.
C. the damage reduction per dollar spent in reducing emissions, including emissions taxes and abatement costs, should be equalized across sources.
D. both B and C.

Difficulty: Moderate

25.  If regulators are considering an emissions tax, they will be more uncertain about the resulting level of emissions if
A. firms in the industry experience a steep abatement cost curve.
B. firms in the industry experience a flat abatement cost curve.
C. the firms are located in a rural area.
D. the firms are located in an urban area.

Difficulty: Easy

26. Refer to the Figure above. A firm facing an emissions charge of t and an abatement cost curve of MAC₁ will emit e₁ and
A. face abatement costs of (a+b+c+d+e).
B. face abatement costs of (a+b+d+e).
C. face abatement costs of (d+e) and taxation charges of (a+b+c).
D. face abatement costs of (d+e) and taxation charges of (a+b).

Difficulty: Easy

27. Refer to the Figure above. The firm is facing an emissions charge of t and an abatement cost curve of MAC₁. If the firm is able to lower its abatement cost curve to MAC_2, it will
A. emit at level e₁ and save (d+e).
B. emit at level e₁ and save (d).
C. emit at level e₂ and save (c+d).
D. emit at level e₁ and save (d+e).

Difficulty: Moderate

28. Refer to the Figure above. The firm is facing an emissions charge of t and an abatement cost curve of MAC₁. If the firm is able to lower its abatement cost curve to MAC_2, and it now faces an emissions standard of e₁, the firm will
A. emit at level e₁ and save (d+e).
B. emit at level e₁ and save (d).
C. emit at level e₂ and save (c+d).
D. emit at level e₁ and save (d+e).

Difficulty: Moderate

29.  Which of the following is true when emission charges are compared to emission standards?
A. Polluters pay both emission charges and abatement cost charges under a policy of emissions charges, but only pay for abatement costs when emission standards are in place.
B. Polluters automatically reduce their emissions when abatement costs decline under a policy of emissions charges, but do not reduce their emissions automatically when standards are in place and abatement costs decline.
C. Polluters will realize bigger pollution control cost reductions from R&D efforts under a policy of emission charges than under a policy of emission standards.
D. all of the above.

Difficulty: Moderate

30.  Refer to the Table above. What level of emissions would a firm choose given the marginal abatement cost and the subsidy level detailed above?
A. Indeterminate
B. 0
C. 4
D. 9

Difficulty: Moderate

31. A two-part emission charge

A. means changing different rates at different emission levels of a single pollutant

B. means some polluters are charged zero, while other polluters are charged a positive fee for the same emission level

C. means some polluters earn a subsidy while other polluters pay a charge

D. allows polluters to share emissions charges between two facilities

32. The primary source of carbon dioxide emissions is

A. deforestation

B. burning fossil fuels

C. exhaling by all animal life

D. rotting plant debris

33. Placing a carbon tax “upstream” means

A. applying a carbon tax to retailers (online and brick & mortar stores)

B. applying a carbon tax to polluters along rivers and other waterbodies

C. applying a carbon tax when fossil fuels are first sold

D. applying a carbon tax at the fossil fuel pump for automobiles

34. Which of the following are examples of deposit-refund systems?

A. beverage containers in some states in the U.S.

B. new cars in Sweden

C. waste oil in Germany

D. all of above

35. Abatement subsidies can increase total emissions when

A. the pollution control technology supported by the subsidy is outdated

B. the number of polluting firms entering the industry increases to gain the subsidies

C. marginal abatement costs decrease while marginal damages remain the same

D. marginal damages decrease while marginal abatement costs remain the same