11

11
Student: ___________________________________________________________________________
1. The socially efficient equilibrium emission standard sets the maximum rate of emissions equal to the
________.
A. socially efficient level of abatement
B. socially efficient level of emissions
C. level of emissions that maximizes total abatement cost
D. level of emissions that minimizes total abatement cost
________.
A. the level of abatement that equates MAC and MDC
B. level of emissions that maximizes total abatement cost
C. the level of emissions that minimizes total abatement cost
D. the level of emissions that equates MAC and MDC
3. Standards that take the form of never-exceed levels for specific pollutants in an ambient environment are
known as ________.
A. emission standards
B. ambient standards
C. performance standards
D. technology-based standards
4. The ________ measures the residuals produced per unit of output (e.g., SO2 emissions per kilowatt hour
of electricity produced).
A. emission standard
B. emissions intensity
C. emission concentration
D. emission rate
5. When marginal damages for a pollutant vary by region, time of day, or season, a(n) ________ will
not be socially efficient but ________ that set the MAC curve equal to each MDC curve are socially
efficient.
A. uniform standard; individual standards
B. ambient standard; uniform standards
C. individual standard; uniform standards
D. technology-based standard; uniform standards
6. ________ set standards that are unrealistic with today's technology in the hope that they will motivate the
pollution-control industry to invent ways of meeting the standard at reasonable cost.
A. Technology-based standards
B. Technology-forcing standards
C. Strict emission standards
D. Performance standards
7. Under ________ the burden is on the ________ to make the right decision about what technology to
use.
A. technology-forcing standards; pollution control industry
B. technology-based standards; polluting firms
C. technology-based standards; public regulatory authority
D. emission standards; public regulatory authority
Suppose the marginal abatement costs of a firm before a given technological improvement equal MAC1
and MAC2 is the marginal abatement cost curve the firm could expect to have after investing resources
in R&D to develop better treatment or recycling technology. So we have the following two possible
marginal abatement cost functions and the marginal damage cost function for the firm of:
MAC1 = 240 - 4E
MAC2 = 180 - 3E
MDC = 2E
8. If the firm faced a standard of 40 units of emissions, what is the maximum amount of money it would be
willing to spend on R&D to achieve the lower MAC?
A. $200
B. $400
C. $600
D. $800
9. Emission standards specify the technologies, techniques, or practices that potential polluters must
adopt.
True False
10. The ambient quality of the water at various points downstream of a source of pollution depends on the
quantity of emissions only.
True False
11. When marginal damages for a pollutant vary by region, time of day, or season, a uniform standard
will not be socially efficient but individual standards that equate the MAC to each MDC are socially
efficient.
True False
12. Standards will be cost effective when they equate the level of emissions at each source.
True False
13. In order to set individual standards in accordance with the equimarginal principle, regulators would have
to know the marginal abatement cost relationship for each polluting source.
True False
14. Technology-based standards provide firms with no incentive to find cheaper ways to reduce their
emissions.
True False
15. Including the costs of enforcement decreases the socially efficient level of emissions.
True False
16. Regulators need to strike a balance when setting the size of penalties for non-compliance so that courts
will not be reluctant to impose sanctions on firms who fail to meet the standard.
True False
17. When regulators allow firms to self-monitor their compliance with emission standards, occasional audits
from the regulator aim to avoid the problem of incomplete compliance.
True False
18. List five perceived advantages of using standards to address environmental problems.
19. If the marginal abatement cost equation for an industry is given by: MAC = 600 - 0.5E and the marginal
damage cost equation for the same industry is MDC = 2.5E, what is the socially efficient equilibrium
standard? What is the total abatement cost to achieve this standard?
The marginal damage cost equation for carbon monoxide (CO) in urban areas is equal to:
MDCU = 20E
The marginal damage cost equation for CO in rural areas is equal to:
MDCR = 8E
The marginal abatement cost equation for CO is equal to:
MAC = 600 - 4E
20. Is there a uniform standard for carbon monoxide emissions that can be socially efficient in both urban and
rural areas? Very briefly explain why or why not.
21. What are the socially efficient individual standards for carbon monoxide? What is the total abatement
cost in each area under this scheme?
The following table summarizes the marginal abatement cost functions for an industry with two sources
of pollution.
22. Suppose the regulator wished to reduce total industry emissions by 25% by implementing a uniform
standard. What is the level of emissions and abatement at each source under the uniform standard? What
is the total compliance cost for the industry of the uniform standard? Is this a cost-effective allocation of
the industry abatement target?
23. Suppose the regulator wished to reduce total industry emissions by 25% by implementing cost-effective,
individual standards. What is the level of emissions and abatement at each source under cost-effective,
individual standards? What is the total compliance cost for the industry under the individual standards?
24. Technology-based standards have two different enforcement issues. Briefly explain what these two issues
are.
11 Key
________.
A. socially efficient level of abatement
B. socially efficient level of emissions
C. level of emissions that maximizes total abatement cost
D. level of emissions that minimizes total abatement cost
Accessibility: Keyboard Navigation
Difficulty: Easy
Field - Chapter 11 #1
Learning Objective: 11-01 Define and illustrate graphically the socially efficient equilibrium emission standard and explain its advantages.
________.
A. the level of abatement that equates MAC and MDC
B. level of emissions that maximizes total abatement cost
C. the level of emissions that minimizes total abatement cost
D. the level of emissions that equates MAC and MDC
Difficulty: Moderate
3. Standards that take the form of never-exceed levels for specific pollutants in an ambient environment
are known as ________.
A. emission standards
B. ambient standards
C. performance standards
D. technology-based standards
Difficulty: Easy
Learning Objective: 11-02 Describe and contrast the different types of standards that can be introduced as direct regulation.
4. The ________ measures the residuals produced per unit of output (e.g., SO2 emissions per kilowatt
hour of electricity produced).
A. emission standard
B. emissions intensity
C. emission concentration
D. emission rate
Difficulty: Easy
5. When marginal damages for a pollutant vary by region, time of day, or season, a(n) ________ will
not be socially efficient but ________ that set the MAC curve equal to each MDC curve are socially
efficient.
A. uniform standard; individual standards
B. ambient standard; uniform standards
C. individual standard; uniform standards
D. technology-based standard; uniform standards
Difficulty: Easy
Learning Objective: 11-03 Explain the complexities introduced in setting standards when marginal damages differ by region or time of day or other factor.
6. ________ set standards that are unrealistic with today's technology in the hope that they will motivate
the pollution-control industry to invent ways of meeting the standard at reasonable cost.
A. Technology-based standards
B. Technology-forcing standards
C. Strict emission standards
D. Performance standards
Difficulty: Easy
Learning Objective: 11-05 Explain the degree of flexibility of different types of standards and their ability to spur investment in new technologies that can lower
emission intensity.
7. Under ________ the burden is on the ________ to make the right decision about what technology to
use.
A. technology-forcing standards; pollution control industry
B. technology-based standards; polluting firms
C. technology-based standards; public regulatory authority
D. emission standards; public regulatory authority
Difficulty: Easy
emission intensity.
Suppose the marginal abatement costs of a firm before a given technological improvement equal
MAC1 and MAC2 is the marginal abatement cost curve the firm could expect to have after investing
resources in R&D to develop better treatment or recycling technology. So we have the following two
possible marginal abatement cost functions and the marginal damage cost function for the firm of:
MAC1 = 240 - 4E
MAC2 = 180 - 3E
MDC = 2E
Field - Chapter 11
8. If the firm faced a standard of 40 units of emissions, what is the maximum amount of money it would
be willing to spend on R&D to achieve the lower MAC?
A. $200
B. $400
C. $600
D. $800
emission intensity.
9. Emission standards specify the technologies, techniques, or practices that potential polluters must
adopt.
FALSE
Difficulty: Easy
10. The ambient quality of the water at various points downstream of a source of pollution depends on the
quantity of emissions only.
FALSE
The ambient quality of the water depends on the quantity of emissions as well as the hydrology of the
river (e.g., rate of flow, temperature, etc.).

Difficulty: Easy
11. When marginal damages for a pollutant vary by region, time of day, or season, a uniform standard
will not be socially efficient but individual standards that equate the MAC to each MDC are socially
efficient.
TRUE
Difficulty: Easy
12. Standards will be cost effective when they equate the level of emissions at each source.
FALSE
This would only be true in the unlikely event that each source had identical marginal abatement cost
functions.

Learning Objective: 11-04 Describe and illustrate graphically how to achieve a cost-effective equilibrium under a standard when the MAC curves for polluters
differ.
13. In order to set individual standards in accordance with the equimarginal principle, regulators would
have to know the marginal abatement cost relationship for each polluting source.
TRUE
The informational requirements to set cost-effective standards are very high.

Difficulty: Easy
differ.
14. Technology-based standards provide firms with no incentive to find cheaper ways to reduce their
emissions.
TRUE
Difficulty: Easy
emission intensity.
15. Including the costs of enforcement decreases the socially efficient level of emissions.
FALSE
Combining the marginal costs of enforcement with the MAC results in the socially efficient level of
emissions increasing.

Difficulty: Easy
Learning Objective: 11-06 Describe the challenges faced in enforcement of standards.
16. Regulators need to strike a balance when setting the size of penalties for non-compliance so that
courts will not be reluctant to impose sanctions on firms who fail to meet the standard.
TRUE
Difficulty: Easy
17. When regulators allow firms to self-monitor their compliance with emission standards, occasional
audits from the regulator aim to avoid the problem of incomplete compliance.
TRUE
Difficulty: Easy
18. List five perceived advantages of using standards to address environmental problems.
Standards have a number of perceived advantages including: 1) they appear to be simple and direct; 2)
they appear to set clearly specified targets; 3) they appeal to people's sense of getting environmental
pollution reduced immediately; 4) they are consistent with our ethical sense that pollution is bad
and ought to be declared illegal; and 5) they conform to an operation of the legal system, which is to
define and stop illegal behaviour.
Difficulty: Easy
19. If the marginal abatement cost equation for an industry is given by: MAC = 600 - 0.5E and the
marginal damage cost equation for the same industry is MDC = 2.5E, what is the socially efficient
equilibrium standard? What is the total abatement cost to achieve this standard?
The socially efficient equilibrium standard is set equal to E* which corresponds to the level of
emissions that equates MAC to MDC:
600 - 0.5E* = 2.5E*
E* = 600/3 = 200
The socially efficient equilibrium emission standard is equal to 200 units of emissions. The total
abatement cost to achieve this standard is equal to the area under the MAC equation from emissions of
200 to the level of unregulated emissions, E0, which can be found by setting MAC = 0:
0 = 600 - 0.5E0
E0 = 600/0.5 = 1,200
So TAC = (1,200 - 200)500 = $250,000.
The marginal damage cost equation for carbon monoxide (CO) in urban areas is equal to:
MDCU = 20E
The marginal damage cost equation for CO in rural areas is equal to:
MDCR = 8E
The marginal abatement cost equation for CO is equal to:
MAC = 600 - 4E
Field - Chapter 11
20. Is there a uniform standard for carbon monoxide emissions that can be socially efficient in both urban
and rural areas? Very briefly explain why or why not.
A uniform standard for CO emissions cannot achieve social efficiency in all areas because the level of
emissions that equates MAC to the MDC in each area will be different.
Difficulty: Easy
21. What are the socially efficient individual standards for carbon monoxide? What is the total abatement
cost in each area under this scheme?
The individual standard for urban areas will correspond to the level of emissions that equates MDCU
to MAC:
20EU = 600 - 4EU
EU = 600/24 = 25
The individual standard for rural areas will correspond to the level of emissions that equates MDCR to
MAC:
8ER = 600 - 4ER
ER = 600/12 = 50
The socially efficient equilibrium individual standards are 25 units of emissions for urban areas and 50
units of emissions for rural areas.
The total abatement cost for urban areas is equal to:
TACU = (150 - 25)500 = $31,250
The total abatement cost for rural areas is equal to:
TACR = (150 - 50)400 = $20,000
The TAC in urban areas will be $31,250 and the TAC in rural areas will be $20,000.
The following table summarizes the marginal abatement cost functions for an industry with two
sources of pollution.
Field - Chapter 11
22. Suppose the regulator wished to reduce total industry emissions by 25% by implementing a uniform
standard. What is the level of emissions and abatement at each source under the uniform standard?
What is the total compliance cost for the industry of the uniform standard? Is this a cost-effective
allocation of the industry abatement target?
To find the initial emissions at each source, find the level of E when MAC = 0:
0 = 1,200 - 3EA
EA = 400
0 = 800 - 2EB
EB = 400
Under the uniform standard each source must abate 25% of its initial emissions, so AA = 100, EA
= 300, AB = 100 and EB = 300. When source A emits 300 units, MACA = 1,200 - 3(300) = $300
and when source B emits 300 units, MACB = 800 - 2(300) = $200. The total abatement cost for
each source will be the area under the MAC curve from emissions of 300 to emissions of 400 (the
unregulated level of emissions).
TACA = (100 300) = $15,000
TACB = (100 200) = $10,000
The total compliance cost of the uniform standard for the industry is equal to the sum of the total
abatement costs at each source:
TCC = 15,000 + 10,000 = $25,000
The uniform standard is not cost effective because it violates the equimarginal principle (MACA
MACB).
differ.
23. Suppose the regulator wished to reduce total industry emissions by 25% by implementing cost-
effective, individual standards. What is the level of emissions and abatement at each source under
cost-effective, individual standards? What is the total compliance cost for the industry under the
individual standards?
The cost-effective policy is to set individual standards where total emissions equal the industry
target level of emissions which is 600 units and the MACs of the two sources are equalized. The
first condition implies that EA + EB = 600 and the second condition implies that 1,200 - 3EA = 800
- 2EB. Rewriting the first condition we get: EA = 600 - EB and then substituting this into the second
condition, we can solve for EB:
1,200 - 3(600 - EB) = 800 - 2EB
1,400 = 5EB
EB = 280
If emissions at source B equal 280, EA = 600 - 280 = 320. This implies abatement of 80 at source
A and 120 at source B. When source A emits 320 units, MACA = 1,200 - 3(320) = $240 and when
source B emits 280 units, MACB = 800 - 2(280) = $240. The total abatement cost for each source
will be the area under the MAC curve from the current level of emissions to emissions of 400 (the
unregulated level of emissions).
TACA = (80 240) = $9,600
TACB = (120 240) = $14,400
The total compliance cost of the uniform standard for the industry is equal to the sum of the total
abatement costs at each source:
TCC = 9,600 + 14,400 = $24,000
We know this is cost effective because MACA = MACB.
Difficulty: Hard
differ.
24. Technology-based standards have two different enforcement issues. Briefly explain what these two
issues are.
The two different issues with technology-based standards (TBS) and enforcement involve initial
compliance and continued compliance. First, the public regulatory authority needs to assure that initial
compliance with the TBS has been met (i.e., the firms have installed the required equipment). Then on
an ongoing basis, the regulator needs to ensure the equipment continues to operate and be maintained
in good repair by the firms.
Difficulty: Easy
11 Summary
Category # of Questions
Accessibility: Keyboard Navigation 17
Difficulty: Easy 17
Difficulty: Hard 1
Difficulty: Moderate 6
Field - Chapter 11 27
Learning Objective: 11- 4
01 Define and illustrate graphically the socially efficient equilibrium emission standard and explain its advantages.
Learning Objective: 11-02 Describe and contrast the different types of standards that can be introduced as direct regulation. 4
03 Explain the complexities introduced in setting standards when marginal damages differ by region or time of day or other factor.
Learning Objective: 11-04 Describe and illustrate graphically how to achieve a cost- 4
effective equilibrium under a standard when the MAC curves for polluters differ.
05 Explain the degree of flexibility of different types of standards and their ability to spur investment in new technologies that can
lower emission intensity.
Learning Objective: 11-06 Describe the challenges faced in enforcement of standards. 4

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