Pollution, Environment, Global Warming (Exam 2)

Question 1

Optimal level of pollution in market

Answer 1

• Determine by comparing marginal benefits against marginal costs

Question 2

Negative externalities

Answer 2

Costs imposed on third parties

Question 3

Positive externalities

Answer 3

Benefits bestowed on third parties

Question 4

Private marginal costs

Answer 4

Marginal costs that accrue to only producers of a good or service

Question 5

Social marginal costs

Answer 5

Marginal costs that accrue to society as a whole

Question 6

Equation relating marginal costs of social with private and externalities

Answer 6

MCsocial = MCprivate + Negative Externality

Question 7

Command-and-control

Answer 7

Direct government regulation of pollution through taxes or emission limits

Question 8

Purpose of taxes and fees

Answer 8

• Increase production costs so producers take into account negative externalities

Question 9

Emission limits

Answer 9

• Place controls/restrictions on specific sources of pollutants (ideally set at socially efficient level of production)

Question 10

Common property resources

Answer 10

• Collectively owned resources

Question 11

Tragedy of the commons

Answer 11

• Normally used to describe overuse of common property resources
• By moving away from common property resources to private; eliminate intervention by government

Question 12

Cap-and-Trade

Answer 12

Upper limit established on emissions; set where marginal social costs of emissions equal to marginal benefits of emissions

Question 13

Tradable pollution rights

Answer 13

• Each polluter given right to emit specific amount of pollutant

Question 14

Carbon offsets

Answer 14

Reductions in emission of CO2 in one place that offset emissions of CO2 elsewhere