Micro Economics Chapter 16

Front 1

The optimal level of pollution abatement is the level at which the _____ of abatement equals the _____ of abatement.

Back 1

marginal benefit, marginal cost

Front 2

The marginal cost of abatement typically _____ (increases/decreases) with the level of abatement.

Back 2

increases

Front 3

In the case of sulfur dioxide pollution, the marginal benefit curve is _____ (positively sloped/negatively sloped/horizontal/vertical).

Back 3

horizontal.

Front 4

What is the private cost of production?

Back 4

The production cost borne by a producer, which typically includes the costs of labor, capital, and materials.

Front 5

What is the external cost of production?

Back 5

is the cost incurred by someone other than the producer.

Front 6

What is social cost of production?

Back 6

is the sum of the private cost and the external cost.

Front 7

What is pollution tax?

Back 7

a tax or charge equal to the external cost per unit of pollution.

Front 8

The private cost of production includes the amount a firm pays for _____, _____, and _____.

Back 8

cost of labor, capital, and materials.

Front 9

The external cost of production is the cost incurred by _____.

Back 9

someone other than producer.

Front 10

The social cost of production equals the _____ cost plus the _____ cost.

Back 10

private cost, external cost.

Front 11

A pollution tax will decrease the amount of pollution a firm generates if the tax exceeds the _____of abatement.

Back 11

marginal cost,

Front 12

compared to a pollution tax, a uniform-abatement policy is _____ (more/less) efficient because it does not exploit differences in _____ across firms.

Back 12

less, abatement cost

Front 13

The "command" part of a command-and-control pollution policy specifies a _____ for each firm.

Back 13

a certain volume of pollution and requires the abatement be done with a particular technology

Front 14

A command-and-control policy is likely to be inefficient because it requires firms to use ________.

Back 14

the same abatement technologies.

Front 15

A pollution tax will decrease the amount of pollution a firm generates if the tax exceeds the _____of abatement.

Back 15

marginal cost,

Front 16

compared to a pollution tax, a uniform-abatement policy is _____ (more/less) efficient because it does not exploit differences in _____ across firms.

Back 16

less, abatement cost

Front 17

The "command" part of a command-and-control pollution policy specifies a _____ for each firm.

Back 17

a certain volume of pollution and requires the abatement be done with a particular technology

Front 18

A command-and-control policy is likely to be inefficient because it requires firms to use ________.

Back 18

the same abatement technologies.

Front 19

What is marketable permits?

Back 19

A system under which the government picks a target pollution level for a particular area, issues just enough pollution permits to meet the pollution target, and allows firms to buy and sell the permits; also know as a cap and trade system.

Front 20

A decrease in the supply of marketable pollution permits will shift the supply curve for permits to the _____ and _____ the equilibrium price of permits.

Back 20

left, increasing

Front 21

A technological advance that decreases abatement cost will _____ the demand for marketable pollution permits and ______ the equilibrium price.

Back 21

decrease, decrease