Chapter 5 - The Economics of Environmental Quality

Question 1

What is the “Policy Question”?

Answer 1

If we do not like the way things are currently turning out, what steps should be undertaken to change the situation?

Question 2

What three key things does the Policy Problem include?

Answer 2

1. Identifying an appropriate level of environmental quality we ought to try to achieve.
2. Dividing the task and costs of meeting environmental quality goals.
3. Distributing benefits and costs across society appropriately.

Question 3

What is the Scientific Basis of Environmental Policy?

Answer 3

The study of how firms and consumers normally make decisions in the market economy.

Question 4

What are the two sides of trade-offs referred to as?

Answer 4

• Damages
• Abatement Costs

Question 5

Define Damages:

Answer 5

All the negative impacts that users of the environment experience as a result of the degradation of that environment.

Question 6

Define a Damage Function:

Answer 6

It shows the relationship between the quantity of a residual and the damage that residual causes.

Question 7

What are the two types of damage functions?

Answer 7

• Emission Damage Functions
• Ambient Damage Functions

Question 8

______________ Damage Function: These show the connection between the quantity of a residual emitted from a source or group of sources and the resulting damage.

Answer 8

Emission

Question 9

______________ Damage Functions: These show the relationship between the concentration of particular pollutants in the ambient environment and the resulting damage.

Answer 9

Ambient

Question 10

How are Damage Functions expressed?

Answer 10

Marginal Damage Functions

Question 11

____________ Damage Function: Shows the change in damage stemming from a unit change in emissions or ambient concentration.

Answer 11

Marginal

Question 12

Why do we use Damage Functions?

Answer 12

To discuss total damages because we know that the areas under marignal damage functions correspond to total damages.

Question 13

What do the height and shape of a damage function depend on?

Answer 13

Pollutant and other circumstances

Question 14

What do the horizontal (x) and vertical (y) axis’ of a damage function represent?

Answer 14

x: Q of a Pollutant
y: Environmental Damage (miles, number, quantity, etc.)

Question 15

What are Thresholds?

Answer 15

Values of emissions or ambient concentrations below which marginal damages are zero.

Question 16

True or False: Thresholds mean that a pollutant can increase to these threshold levels without causing any increase in damages.

Answer 16

True

Question 17

The Damage Function is _________ specific.

Answer 17

time

Question 18

What are some factors that move Damage Functions upward?

Answer 18

• More or less people exposed
• Different time periods
• Different ecosystem conditions
• New scientific estimates of pollution impact

Question 19

True or False: Damage Functions are reversible.

Answer 19

False, once a pollutant has been exposed it is rarely reversible.

Question 20

Define Abatement Costs:

Answer 20

The costs of reducing the quantity of residuals being emitted into the environment, or of lowering ambient concentrations.

Question 21

True or False: Abatement costs will differ from one source to another.

Answer 21

True, each pollutant will require a different treatment.

Question 22

True or False: Marginal Abatement Cost and Marginal Damages share the same x and y axis titles.

Answer 22

True.

Question 23

What does the Marginal Emission Abatement Cost show?

Answer 23

The added costs of achieving a one-unit increase/decrease in emission level.

Question 24

True or False: The Marginal Abatement Cost curve is downward sloping.

Answer 24

True.

Question 25

The larger the reduction in emissions, the _________________ the marginal costs of producing further reductions.

Answer 25

greater

Question 26

The marginal abatement cost function can express ___________ marginal costs of a source or the __________________ marginal abatement costs.

Answer 26

actual, lowest possible

Question 27

How do you find the total costs of abating emissions at a certain level?

Answer 27

From the area under the marginal abatement cost curve, a+b (reading from right to left on the graph)

Question 28

Define Technological Change in Abatement Costs:

Answer 28

A critical factor in the long-run effort to reduce environmental pollution.

Question 29

What three steps is Technological Change divided into?

Answer 29

1. Research and Development (R&D) 2. Innovation 3. Adoption

Question 30

What is R&D?

Answer 30

Research and Development: Basic research that identifies potentially new procedures and techniques for educing emissions.

Question 31

Define Innovation:

Answer 31

Incorporating the results of R&D into real-world technologies that are economically feasible.

Question 32

Define Adoption:

Answer 32

The widespread application of the technology, spreading from early adopters to entire economic sectors.

Question 33

What is the central idea of the Abatement Cost function?

Answer 33

A function that shows the least costly way of achieving reductions in emissions.

Question 34

Define the Efficient Level of Emissions:

Answer 34

The level at which marginal damages are equal to marginal abatement costs.

Question 35

The idea of the efficient level of emissions comes under ______________ economics.

Answer 35

normative

Question 36

Abatement costs depend critically on the ____________ available for reducing effluent streams.

Answer 36

technology

Question 37

What doe she application of the Equimarginal Principle say?

Answer 37

If there are multiple sources of a pollutant with differing marginal abatement costs, and if it is desired to reduce aggregate emissions at the least possible cost, then emissions from the various sources must be reduced in accordance to the equimarginal principle.

Question 38

True or False: The equiproportionate Reduction violates the equimarginal principle.

Answer 38

True. MAC are not equalized when each source reduces its effluent.