3. Pollution taxes can be made revenue neutral by. a. employing the Coase Theore
ID: 1180442 • Letter: 3
Question
3. Pollution taxes can be made revenue neutral by.
a. employing the Coase Theorem Corollary.
b. rebating pollution taxes back in the form of income tax cuts. 2
c. improving labor market efficiency.
d. using a permit give-away system.
e. raising income taxes.
4. Relative to command-and-control regulation, incentive-based approaches increase the incentives for discovering new pollution control technology by.
a. making it costly for firms to pollute, even below the standard.
b. doing away with the requirement to use a certain type of technology.
c. forcing the marginal costs of reduction at each plant to be equal.
d. a and b.
e. a, b and c.
5. Hot spots.
a. are more likely with marketable permit systems than pollution taxes.
b. occur when pollutants are uniformly mixed.
c. can be avoided under a pollution tax system if monitoring and enforcement are beefed up.
d. can be controlled under a tax system by varying the level of the tax in different regions.
e. are a relatively minor problem with incentive-based regulation.
6. Replacing a system of command-and-control regulation with marketable permit regulation is unlikely to achieve all possible cost-savings due to each of the following except.
a. thin markets.
b. poor information on the part of regulators about the costs of pollution reduction at each firm.
c. the need for additional investment in monitoring and enforcement.
d. the exercise of market power.
e. the need to put some restriction on permit life.
1. The success of lead trading cannot be explained by the fact that .
a. monitoring and enforcement were good.
b. there were many market participants.
c. hot spots, if they developed, were unable to persist because the permits were "shrinking".
d. banking was not permitted.
e. no new firms sought to enter the market.
2. In the emissions trading program, all of the following have been true except.
a. netting trades have been the most successful.
b. most netting trades have occurred between different plants located within a one-mile radius.
c. offset trades have served to accommodate new growth, with no net increase in emissions.
d. the bubble program has been disappointing due to thin markets and high transactions costs necessary to avoid hot spots.3
e. most offset trades have occurred within the same company.
3. Acidic sulfates and nitrates from fossil fuel emissions.
a. have been firmly connected with the loss of aquatic life in many lakes and streams, particularly in the Northeast.
b. have been firmly connected with the "Forest Death" that is ongoing in Germany.
c. always fall to the earth in the form of rain.
d. probably have little impact on human health.
e. have had an observed impact on agricultural productivity.
4. In the acid rain trading program.
a. overall emissions will continue to rise as new power plants are built.
b. the number of participants small, so thin markets are likely.
c. substantial trading has lead to an early achievement of short-run cost-effectiveness.
d. most cost savings to date have come from the increased flexibility provided.
e. emissions in the current problem area, the Midwest, are still likely to rise.
5. Direct pollution taxes.
a. have less certain impacts than indirect pollution taxes.
b. are fairly widespread in the U.S..
c. are simple, and thus attractive to industry.
d. are more widespread in Europe than the U.S..
e. do not work well in conjunction with command-and-control regulation.
6. Environmental adders in the electric utility industry.
a. force existing plants to pay pollution taxes.
b. provide an advantage to cleaner sources when they bid to supply power to a utility grid.
c. require new sources to pay pollution taxes once they are in operation.
d. are currently set equal to the marginal damages that pollution imposes.
e. are green snakes who live in power plants.
Explanation / Answer
3.C
4.B
5.A
6.B
1.D
2.B
3.C
4.B
5.C
6.A
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