[SOLVED] Modeling Environmental Problems

Section 1: Multiple Choice Questions

Part1

1.  In 2020, most climate scientists believed that

a.  the evidence for global warming remained somewhat flimsy.

b.  carbon dioxide was the only human made source of the greenhouse effect.

c. the earth was likely to warm over the next 50 years as a consequence of greenhouse gas pollution.

d.  belly button lint caused cancer.

e. atmospheric carbon dioxide levels were likely to stabilize naturally within 20 years.

2.  Negative feedback effects on global warming

a.  include exposure of dark earth as polar ice caps melt.

b.  would accelerate the warming trend.

c.  would slow down the warming trend.

d.  would result if higher CO2 levels reduced the capacity of the ocean to absorb CO2.

e.  are likely if the melting of frozen tundra increases the emission of methane gas into the atmosphere.

3.  If global warming does occur, economic costs include

a.  enhanced agricultural productivity in cold climates.

b.  sea-level rise.

c.  enhanced agricultural productivity, especially in poor countries.

d. a likely increase in the diversity of natural ecosystems, as warmer climates emerge.

e.  b and d.

4.  Benefit-cost analysis of global warming

a.  has proven to be relatively uncontroversial.

b.  suggests that on net, controlling CO2 emissions will generate higher costs than benefits.

c.  is a scientific process, free of ethical decisions.

d.  calls for at least moderate reductions in greenhouse gas emissions.

e. has created a consensus view among economists as to how fast new technologies can be developed.

5.  Given that government regulators operate in a world of poor information, and are subject to political influence,

a.  conservatives nevertheless concede that government intervention to protect the environment is generally socially beneficial.

b.  conservatives seek an absolute minimum of government intervention.

c.  progressives have faith that a laissez-faire attitude is best for the environment.

d.  progressives view active government as both effective and necessary.

e.  b and d.

6.  Incentive-based regulatory approaches, such as pollution taxes

a.  areviewed positively by most economists– both progressive and conservative– as a way to control pollution.

b.  provide less flexibility than traditional technology-based regulation.

c.  tend to hurt wealthier people more than poor people.

d. would be sufficient, in the eyes of progressive economists, to control global warming.

e.  require that the government specify certain types of pollution control technology that firms must adopt.

Part2

1.        Ecological economists argue that

a.        resource scarcity may lead to catastrophic outcomes in the long run.

b.        created capital can generally substitute for natural capital.

c.        important resource scarcities are unlikely to emerge until the second half of the 21st century.

d.        that population and consumption pressure may lead to near term increases in the price of key resources.

e.       a and d.

2.        The IPAT equation tells us that to keep emissions of nitrogen oxide constant, if population doubles

a.        and consumption per person also doubles, technology must improve by a factor of eight.

b.        and consumption per person is halved, than technology must also cut emissions per unit of output by half.

c.        and technology cuts emissions of output by half, than consumption must stay constant.

d.        and consumption per person also doubles, technology must improve by a factor of  2.

e.       a and c.

3.       To measure the sustainability of resource use, ecological economists

a.        have developed the measure known as NNW.

b.       weigh population and consumption pressure against resource stocks.

c.        adjust GDP to account for the costs of economic growth.

d.        rely on the decay rate of plutonium.

e.       give a generous allowance for technology to generate substitutes for the resource in question.

4.         If selling timber in a country generates resource rent of $200 million in a given year, then:

a.        NNW will rise by $200 million that year.

b.        NNW fall by $200 million that year.

c.        IW will fall by $200 million that year.

d.        IW will not change that year.

e.        None of the above

5.  Environmental footprint analysis

a.  concludes that we need more than 5 planets to support the current level of population.

b.  utilizes the acreage needed to sequester carbon to account for emissions of carbon dioxide.

c.   focuses largely on the acreage needed for agricultural production.

d.  is lower for countries high on the Human Development Index (HDI) scale.

e.  is a preferred tool of neoclassical economists.

Part3

Plant A   (MCa  = 12 – 2xa)

Plant  B   (MCb  = 9 – xb)

1.  In the diagram above, Plant A is currently polluting 9 units of gunk per day, while Plant B is polluting 6 units of gunk, for a total of 15. To achieve a cost-effective reduction to 9 units total

a.  regulators could distribute tradeable permits for 7 units per day to plant A, and 2 units per day to Plant B.

b.  regulators could set a tax equal to $4 per unit of gunk.

c.  regulators could specify that Plant A reduce emissions to 4 units per day, while plant B reduce emissions to 5 units per day.

d.  aor b.

e.  a, bor c.

2. Suppose that regulators set a tax equal to $4 per unit of gunk per day.  In that case, Plant A would pay in clean-up costs and taxes

a.  $24.

b.  $20.

c.  $16.

d.  $10.

e.  $4.

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.

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, band c.

5.  Hotspots

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.  area 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.

Part 4

1.  The following are normative statements:

a.   If global warming occurs, sea-level rise is likely to pose a serious problem for some countries.

b.  Because of the costs associated with sea-level rise, carbon dioxide emissions should be cut to slowdown global warming.

c. Survey results indicate that a majority of the population agrees with the statement: global warming should be prevented regardless of the cost.

d.  Ifour goal is to slowdown global warming, carbon dioxide emissions should be cut.

e.  b,c, and d.

2.  Economists believe that normative positions on environmental issues

a.  area matter of opinion, and thus not amenable to study.

b.  can be better understood if all underlying assumptions are clearly stated.

c.  are only valid if based in utilitarian thought.

d.  area matter of opinion, and thus not relevant to real life problems.

e.  should not differ if all parties are rational individuals.

3.  From a utilitarian perspective, preserving rainforests to protect biodiversity

a.   is relatively unimportant.

b.   should not be done if it conflicts with profits.

c.    always makes sense if it actually protects endangered species.

d.   should be pursued if  it increases overall human well-being.

e.   is definitely a bad idea if it leads to local people losing jobs and income.

4.  Equal marginal utility of consumption

a.  means that Joand Al receive the same level of utility from their overall consumption.

b.  means that Joand Al receive the same level of utility from small increases or decreases in consumption.

c.  means that a one dollar increase to a rich individual just offsets the decrease in social welfare of a one dollar decrease to a poor individual.

d.   implies  that  policy-makers should be quite sensitive to the distribution of costs and benefits generated by environmental protection.

e.  band c.

5.     If  Al   is  alive  today,   and  Jo   is   not  yet   born,  than  the  social  welfare  function SW=UAl(XAl)+UJo(w*XJo)

a.  reduces the value of Jo’s consumption by a factor w.

b.  indicates that Al’s consumption cannot come at Jo’s expense.

c.  implies that an efficiency standard is called for.

d. fails to take sustainability into account. e.  restates Einstein’s theory of relativity.

6.  In the social welfare function SW=UAl(XAl, w*P)+UJo(XJo, w*P), let P stand for pollution, with Aland Jo both exposed.  This SW function

a.  implies that a sustainability standard is called for.

b.  implies that an efficiency standard is called for.

c.  implies that a safety standard is called for.

d.  pays no special attention to pollution victims.

e.  is generally less valid than the one in question 5.

Section 2: Modeling Environmental Problems

1. Two paper plants are polluting the bay outside of Lobsterville with gunk. The authorities have decided that to protect the lobster fisheries, total gunk emissions must be reduced to 9 tons per day. Plant A has marginal emission reduction costs of 10-xa dollars per day, where xa  is the level of pollution, and is currently emitting 10 tons. Plant B has marginal emission reduction costs of 10-2xb  dollars per day, where xb  is the level of pollution, and is currently emitting 5 tons. Thus, 15 tons are currently being emitted.   The situation is diagrammed below.

a. Suppose the regulators decide that each plant must reduce emissions by 3 tons (xa=7, xb=2). Is this a cost-effective way to control emissions back to a level of 9? Why or why not?

b. Now suppose that the regulators wish to reduce total emissions to 6 tons of gunk.   What tax rate perton should they charge? In the figure below, illustrate the taxes and clean-up costs that each firm would bear under this proposal. (No need to calculate them.)

c. Suppose gunk was a non-uniformly mixed pollutant. Could a uniform pollution tax be used to achieve the identical lobster health goal that the city council was shooting for in part (a)?

Section 3: Bonus Problem (short answer – 3-4 paragraphs).

Reflect on the negotiation exercise you did in class. What do you think are the obstacles in the  way of the world coming to a climate agreement, and do you think nations will overcome these obstacles?