ch. 12 true/false Flashcards
A negative externality is incorporated into the supply-and-demand model by an upward
shift of the supply curve.
true
A Pigovian tax will result in an increase in the equilibrium price and an increase in the equilibrium quantity.
false
A Pigovian tax will eliminate negative externality damages.
false
Providing a subsidy can increase social welfare in the presence of a positive externality.
true
A positive externality is incorporated into the supply-and-demand model by a downward
shift in the demand curve.
false
An upstream tax is one that is placed on goods and services after they have been
transported to markets for sale.
false
A revenue-neutral tax is one that equalizes the cost to consumers and producers.
false
Environmental taxes in the United States, as a percentage of total tax revenues, are equal
to the average of developed nations.
false
The willingness-to-pay principle states that economic value of something equals the
maximum amount people are willing to pay for it.
true
Total economic value equals the sum of ecosystem services and intrinsic value.
false
The ability of trees to store excess carbon is an example of a nonuse benefit.
false
The value that people obtain from knowing an ecosystem will be available to future
generations is an example of a nonuse benefit.
true
Economists tend to prefer the replacement cost approach when estimating nonmarket values.
false
Travel cost models are an example of a revealed preference method.
true
Contingent valuation is an example of a stated preference method.
true
The present value formula is PV(Xn) = Xn / (1+r)n
true
Increasing the discount rate will result in a higher present value of a future benefit.
false
The value of a statistical life estimates the cost of treating illnesses associated with
environmental damage.
false
The precautionary principle states that policies should err on the side of caution when
there is a probability of a catastrophic outcome.
true
The main advantage of a pollution standard is that it is a cost effective way to reduce
pollution.
false
The main advantage of a technology standard is that enforcement and monitoring costs
tend to be relatively low.
true
Most firms will respond to a pollution tax by reducing their pollution to zero.
false
With a system of tradable pollution permits, the firms with the higher pollution reduction
costs will sell the most permits.
false
Cost-benefit analysis of the U.S. Clean Air Act indicates that it has generated significant
net benefits.
true
Comparison of gas prices with gasoline consumption across countries indicates an
inverse relationship.
true
Environmental protection tends to increase economic growth in developing, but not
developed, countries.
false
“Green” investments tend to particularly benefit the world’s poorest people.
true
