1. Clicker Review

2. A marginal damage function represents a)the costs associated with reducing pollution to a lower level b)the increase in damage that results from an increase in the level of pollution c)the opportunity costs associated with production of a good or service d)the costs of labor, capital and energy needed to lessen the emission of pollution 1

3. A marginal abatement cost function represents a)the costs associated with reducing pollution to a lower level b)the increase in damage that results from an increase in the level of pollution c)the opportunity costs associated with production of a good or service d)the costs of labor, capital and energy needed to lessen the emission of pollution e)both (a) and (d) 2

4. If society is composed of two polluters, with the MAC of polluter 1 and 2 given by the following equations: MAC 1 = 18 – E 1 MAC 2 = 12 – 2E 2 the unregulated level of pollution for each polluter is a)18 units by polluter 1 and 6 units by polluter 2 b)9 units by polluter 1 and 12 units by polluter 2 c)4 units by polluter 1 and 4 units by polluter 2 d)18 units by polluter 1 and 12 units by polluter 2 3

5. Given the following MD and MAC functions: MD = 3E MAC = 120 – 2E the optimal level of pollution emissions (E) for society is a)0 b)24 c)60 d)90 e)120 4

6. The optimal level of pollution abatement across two firms is a)a mandated reduction of equal quantities by each firm b)a reduction of emission levels by each firm to the point where marginal abatement costs are equal across firms c)a reduction of emission levels by each firm to the point where emission levels are equal d)any of the above 5

7. The the discount rate used in computing a cost-benefit analysis, the the weight placed on future benefits and costs. a)lower; lower b)higher; higher c)higher; lower d)none of the above 6

8. The indirect technique based on a theory of consumer behavior which says that people value a good because they value the characteristics of a good is a)Travel cost method b)Contingent value method c)Hedonic pricing method d)Heimlich maneuver 7

9. The travel cost method is based on the premise that a)A survey of individuals at different recreational sites will provide information about the appropriate level of pollution at those sites b)Travel cost to a site can be regarded as the price of access to the site c)That individual measurements of consumer surplus can be used to generate an average value associated with a specific recreational site d)Both (b) and (c) 8

10. If, on average, truck drivers are willing to accept a 1/2000 annual risk of death if their income increases by $5000 annually, what is the collective willingness to be compensated to accept the loss of life? a)$2 million b)$5 million c)$10 million d)$12 million 9

11. The contingent valuation method for estimating benefits suffers from a)Hypothetical bias b)Strategic bias c)Free-riding d)All of the above. 10

12. The next three questions refer to the following, a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. Option C : OptionABC Total Benefits $3.5m$3.0m$1.0m Total Costs$3.0m$2.3m$0.1m a)is the safest b)Is the least efficient c)Is the most efficient d)Has the lowest net benefits. 11

13. The following is a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. The marginal cost of tightening the standard from option C to option B: OptionABC Total Benefits $3.5m$3.0m$1.0m Total Costs$3.0m$2.3m$0.1m a)Is $2.3m b)Is $0.7m c)Is $0.9m d)Is $2.2m e)Is $2.4m 12

14. The following is a summary table for regulations designed to reduce dangerous gunk pollution. Option A is the most stringent, C the least. A 7% discount rate was used for future costs and benefits. If a 3% discount rate had been used: OptionABC Total Benefits $3.5m$3.0m$1.0m Total Costs$3.0m$2.3m$0.1m a)both total costs and total benefits of all three options would be larger b)both total costs and total benefits of all three options would be smaller c)the efficient option would have to stay the same d)total benefits would be larger for all three options, but total costs would remain unchanged e)the table would be unchanged 13