ECON 2J03 - Environmental Economics – Test 1; Answered 100% Solved | Latest Winter 2025/26.

ECON 2J03 - Environmental Economics – Test 1 Resources devoted to monitoring the behaviour of firms, agencies, and individuals subject to environmental regulations are called . Question 1 options: a) abatement costs b) enforcement costs c) private costs d) environmental costs Question 2 (1 point) Saved Suppose a manufacturing firm that is about to be regulated faces the following actual and potential production costs: 1) $2,500 before regulation; 2) $2,925 in the future without the regulation; and 3) $3,240 in the future with the regulation. The before/after cost of the regulation is and the with/without cost of the regulation is . Question 2 options: a) $425; $740 b) $425; $315 c) $740; $315 d) $315; $425 Question 3 (1 point)Saved When environmental regulation of an entire industry results in output adjustments, the social cost of the regulation can be measured by the changes in consumer and producer surpluses. Question 3 options: True False Question 4 (1 point) Saved When supply and demand are linear curves, the incidence of the tax depends on the slopes of the demand and supply curves. Question 4 options: True False Question 5 (1 point) SavedRefer to Table below. If the with/without principle were applied to estimate the change in cost due to a new environmental regulation, the added costs due to the new regulation would be . Production costs before the regulation $ 200 Production costs in the future, without the regulation $ 250 Production costs in the future, with the regulation $ 290 Question 5 options: a) $90 b) $40 c) $50 d) $290 Question 6 (1 point) Saved Enforcement costs for new protective programs include Question 6 options: a) resources devoted to monitoring the behavior of firms. b) relaxed enforcement on other regulations. c) both A and B. are types of enforcement costs. neither A nor B. are an example of enforcement costs. Question 7 (1 point)Saved Refer to the Figure below. Panel (a) and Panel (b) represent industries that have experienced cost increases due to environmental regulations. Assume that both price increases are equivalent. Which panel reflects less impact on the consumer and a large industry adjustment, in terms of less output? Question 7 options: a) Panel (a) reflects a larger industry adjustment. b) Panel (b) reflects a larger industry adjustment. c) Panel (a) and Panel (b) reflect the same industry impact. d) The graphs do not indicate which industry is affected more by the regulations.Question 8 (1 point) Saved Refer to the Figure below. In Panel (b), the increase in total cost of producing the original quantity of output at the new cost associated with increased environmental regulations would be Question 8 options: a) p2 x r1. b) (d + e + f). c) p2 x r2. Question 9 (1 point)Saved The change in consumer surplus resulting from an increase in environmental quality (a public good) can be measured in the same way as the change in consumer surplus for a private good Question 9 options: True False Question 10 (1 point) Saved The practice of estimating willingness to accept Question 10 options: a) asks how much compensation people require for a reduction in environmental quality. b) asks how much respondents are willing to pay for a reduction in environmental quality. c) is constrained by a respondents' ability to pay. d) is typically equivalent to a respondent's willingness to pay. Question 11 (1 point) Saved For a firm with more than one source of emissions, the states that the total costs of abating a givenabatement target will be minimized when the marginal costs of abatement are across sources. Question 11 options: b) law of one price; equalized c) equimarginal principle; minimized d) Coase theorem; equalized Question 12 (1 point) Saved The height of the marginal damage curve at a particular level of emissions shows how much total damages change if there is a small change in the quantity of emissions. Question 12 options: False Question 13 (1 point) Saved Refer to Figure below. Total damages associated with damage curve MD2 at an emissions level of e1 is . a) equimarginal principle; equalized TrueQuestion 13 options: a) $28 b) area a c) area b d) area a + b Question 14 (1 point) Saved External costs can drive a wedge between the market demand curve and the social marginal WTP curve resulting in a market failure. Question 14 options: True False Question 15 (1 point) SavedRefer to Figure below. At quantities lower than the socially efficient level, . Question 15 options: a) MWTP is higher than the marginal cost of production, the good is under supplied b) quantity demanded is greater than the willingness to supply, the good is over supplied c) MWTP is less than willingness to supply, the good will not be produced d) the graph does not depict quantities that are lower than the socially efficient level Question 16 (1 point) Saved An example of an external cost of driving automobiles is Question 16 options: a) fuel or energy for the vehicle b) flat tire replacement c) insurance and registration d) road congestion Question 17 (1 point) SavedRefer to Table below. At a market price of $4.00, what is industry supply? Marginal Costs Firm A Quantity Firm B Quantity Firm C Quantity Firm D Quantity $1.00 0 0 0 0 $2.00 5 0 0 3 $3.00 8 6 1 8 $4. $5. Question 17 options: a) 0 b) 48 units c) $ 192.00 d) Indeterminate. The table does reveal aggregate supply. Question 18 (1 point) Saved Low-phosphate detergents, mercury-free thermometers and energy-efficient appliances are all examples of . Question 18 options: a) pollution-intensive goods b) low-carbon goods c) environmentally friendly goods d) pollution-free goods Question 19 (1 point)Saved A living resource can become non-renewable if the rate of harvest exceeds the growth rate of the resource's stock. Question 19 options: True False Question 20 (1 point) Saved Economists believe people pollute because Question 20 options: a) people don't care b) people have too many options for their time c) governments are filled with corruption d) pollution is the cheapest waste disposal method of waste products Question 21 (1 point) Saved Climate change models have predicted an increase in the earth's temperature, greater climate variability and more extreme weather events in the 21st century if greenhousegas emissions from human activity continue to be emitted at their current pace. Question 21 options: False Question 22 (1 point) Saved Many environmental issues are local or regional; however, some are international or global in scope. An example of a global environmental issue is . Question 22 options: a) destruction of the stratospheric zone b) greenhouse gases c) global warming Question 23 (1 point) Saved Positive economics is the study of . Question 23 options: a) what will be True d) all of the aboveb) what is c) beneficial economic outcomes d) economic outcomes that are most likely Question 24 (1 point) Saved What are some of the issues with Hedonic estimation? Question 24 options: a) Distortion of housing markets and prices due to too few sales b) It is not easy to measure environmental quality c) Environmental quality is a subjective matter d) all of the above Question 25 (1 point) Saved In surveys and experimental work where people are asked to compare gains and losses relative to a reference point, they place a higher value on losses from this reference point than gains. Question 25 options: True FalseQuestion 26 (1 point) Saved treats people in the same circumstances identically. Question 26 options: a) Vertical equity b) Horizontal equity c) Intergenerational equity d) none of the above Question 27 (1.5 points) Saved The following equations represent the inverse supply and demand functions in the market for Good A: PC = 80 - ½ QD PP = 14 + QS where PC and PP are the prices paid by consumers and received by producers respectively. QD and QS are thequantities demanded and supplied, respectively. Suppose the government imposes a tax of $12 per unit of Good A. What is the incidence of this tax on consumers and producers? Question 27 options: Before the tax, Qd=160-2Pc Qs=Pp-14 Qd=Qs, so 160-2Pc=Pp-14, and at equilibrium, Pp=Pc-P so P=58, Qd=160-116=44, Qs=58-14=44 After the tax, Pc+t=80-0.5Qd, Qd=160-2Pc-2t, Qd=Qs, and Pc=Pp=P so 160-2Pc-2t=Pp-14 174-2t=3P, 3P=174-2*12=174-24=150, so P=50, which is the amount paid by the producer. Thus, the amount paid by consumer is 50+12=62. Tax incidence on consumer: 62-58=4 Tax incidence on producer: 58-50=8 Qd=160-2Pc Qs=Pp-14 Without the taxes, if we let Qd=Qs,160-2Pc=Pp-14, Pp=Pc-P we can get P=58, Qd=160-116=44, Qs=58-14=44 With the tax, Pc+12=80-0.5Qd, Qd=160-2Pc-24, Qd=Qs, and Pc=Pp=P so 160-2Pc-24=Pp-14 13P=174-24=150, so P=50 Thus, the amount paid by the producer is 50, and the amount paid by consumer is 62 (50+12). Tax incidence on consumer=62-58=4 Tax incidence on producer=58-50=8 Question 28 (1 point) Saved Assume reductions in the amount of ground level ozone shift the marginal cost of producing alfalfa from MC1 = 45 + 2QS to MC2 = 45 + 0.5QS. Use the producer surplus to estimate the maximum amount alfalfa producers would bewilling to pay for this improvement in the air quality if the market price of alfalfa is $60/unit of output. PS1=(60-45)*7.5/2=56.25 PS2=(60-25)*30/2=225 The maximum amount alfalfa producers would be willing to pay=225-56.25=168.75 Question 29 (1 point) Saved The following equations represent the MWTP function and the private MC function in the market for some good where a negative externality (i.e., pollution) results in damages of $12 per unit of the good produced: MWTP = 400 - QD MPC = 55 + 0.5QS Solve for the competitive market equilibrium output and the socially efficient level of output for this market. MWTP=MPC 400-Q=55+0.5Q, Q=230 Competitive market equilibrium output Q=230 MSC=MPC+MEC=55+0.5Q+12=67+0.5QMSC=MWTP, so 400-Q=67+0.5Q 1.5Q=333, Q=222 Socially efficient output Q=222 Question 30 (0.5 points) Saved Suppose there are four individual firms in the market for a certain good. Firm 1's supply equation is QS = 2P - 3, firm 2's supply equation is QS = 0.5P - 3, firm 3's supply equation is QS = 1.5P - 8 and firm 4's supply equation is QS = 4P - 2. What is the aggregate supply equation for this market? Aggregate supply equation of this market=2p-3+0.5p-3+1.5p-8+4p-2=8P-16