Chapter 8 Part 1 Flashcards
. 1. What is the expected shape of the marginal cost of pollution reduction curve?
The expected shape of the marginal cost of pollution reduction curve is a downward
curve as you move left to right.
What is the expected shape of the marginal damage of pollution curve?
The expected shape of the marginal damage of pollution is an upward curve as you move left to right.
How do we determine the “optimal” level of pollution?
MC (pollution reduction) = MB (pollution reuction)
What is the equimarginal principle?
balancing of marginal costs and marginal benefits to obtain
an efficient outcome.
What are the 4 main pollution control approaches?
1.Pollution or emission standards
2. Technology-based regulations
3. Pigovian or pollution taxes
4. Transferable or tradable permits
What is an advantage and disadvantage of emission standards?
Advantage: Emission standards can specify a definite desired result
Disadvantage: Requiring all firms or products to meet the same standards is usually not cost-effective
What is an advantage and disadvantage of technology-based approaches?
Advantage: Enforcement and monitoring costs are relatively low.
Disadvantage: Are unlikely to be cost-effective because it does not provide flexibility to pursue a wide range of options.
How do economists determine the efficient level of a pollution tax?
- MC=MB
- Look at the use of a subsidy for pollution reduction rather
than a tax on pollution emitted.
What is an advantage and disadvantage of tradable permits?
Advantage: Economically efficient for firms by them being able to achieve the amount of pollution reduction for the minimum cost.
Disadvantage: Higher cost of production due to the purchasing of more permits could be passed on to consumers as higher prices.
How does a firm decide whether it should buy or sell pollution permits?
Firms will benefit by purchasing permits whenever the permit price is below their
marginal reduction costs or selling permits whenever the permit price exceeds these
costs
How is the equilibrium price of a pollution permit determined?
Equilibrium price of a pollution permit is determined by looking at the point of when the
supply and demand curves intersect.
What are threshold and non-linear impacts of pollution?
Threshold/nonlinear impacts of pollution are the pollution damages that are not linearly
correlated with pollution levels.
What are hotspots?
Local areas with unacceptably high levels of pollution.
How can hotspots be avoided?
By setting standards at the local level or through technology-based approaches
What is the difference between a uniformly mixed and nonuniformly mixed pollutant?
Uniformly Mixed Pollutant: any pollutant emitted by many sources in a region resulting
in relatively constant concentration levels across the region
Non-uniformly Mixed Pollutant:pollutants that cause different impacts in different areas,
depending on where they are emitted.
