Natural Resource and Environmental Economics

1. There are essentially three ways of reducing M (raw material usage) and, therefore,
residuals discharged into the natural environment. These include all of the following
except

a) reducing G (output of goods)

b) increasing Rp (production residuals)

c) increasing rRp + rRc (recycled production and consumption residuals)

d) All of the above.

2. All of the following are examples of point-source pollutants except one. Which one is
not an example of a point-source pollutant?

a) municipal waste treatment plants

b) agricultural chemical runoff
c) electric power plants
d) Eramet Metals manufacturing plant

3. Public goods are distinguished by two primary characteristics. These are

a) market failure; high prices
b) government intervention; high prices
c) nonrivalry; nonexclusivity
d) rivalry; exclusivity

4. The efficient output will be less than the free market output when

a) Marginal social cost and marginal private cost are equal

b) Marginal social cost is greater than marginal private cost
c) Marginal social benefit and marginal private benefit are equal
d) Marginal social benefit is greater than marginal private benefit

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5. The table below shows the marginal benefit from water quality for the only two
citizens of a town. Water quality is a public good. If the marginal cost of water quality
is $75 per quality unit, what is the efficient quantity of water quality

a) 1

b) 2

c) 3

d) 4

e) 5

f) 6

Fanting Gary

Marginal benefit Water Marginal benefit

of water quality Quality of water quality

80 1 100

70 2 85

60 3 60

45 4 35

25 5 15

0 6 0

6. Suppose that society's marginal abatement cost function is given by MAC = 50 - 2E and
society's marginal damage function is given by MD = 3E. What is the optimal level of
pollution emissions?
a) 50
b) 30
c) 20
d) 10

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7. According to the situation above, what would be the optimal per unit pollution tax
a) $50
b) $40
c) $30
d) $20
e) $10

8. Which of the following is a criterion for evaluating environmental policies?

a) efficiency
b) fairness
c) incentives to improvements
d) enforceability
e) All of the above

9. Private bargaining can lead people to the efficient outcome if

a) transactions costs are low and property rights are well defined

b) transactions costs are high and property rights are ill defined

c) transactions costs are high and property rights are well defined

d) transactions costs are low and property rights are ill defined

10. The two defining features of command-and-control regulation are

a) cost-effectiveness and flexible standards

b) pollution taxes and marketable permits

c) uniform standards and technology-based regulations

d) monitoring and compliance

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11. Emission taxes are generally regarded as efficient since

a) they raise the maximum amount of revenue possible for the IRS

b) they encourage all pollution sources to completely eliminate their emissions

c) they require environmental regulators to know the individual source marginal abatement

d) they encourage all pollution sources to adjust their emissions so that the equimarginal
principle is satisfied

12. Marketable pollution permits require a slightly more complex system when there are
geographic differences in pollution effects. One possible approach to designing a
system of permits would be to:

a) use technology-based standards in conjunction with the permits

b) auction off the permits one-by-one over time until all permits have been allocated

c) simply give the permits away to polluters based on their historic emissions rate

d) establish separate markets for each sub region

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Answers

1d 2c 3b 4a 5d 6d 7d 8c 9d 10 b