Question : 71) Refer to Figure 17-4. Firms X and Y have : 1384324

71) Refer to Figure 17-4. Firms X and Y have an emissions tax of $t imposed on each unit of pollution they produce. If Firm X chooses to abate QX units of pollution, the total cost of its abatement is

A) tax amount t multiplied by the maximum possible level of pollution abatement.

B) area beneath the marginal cost of pollution abatement curve.

C) area below the horizontal line at t and above the MC of pollution abatement curve.

D) tax amount t multiplied by the level of pollution abatement, QX.

E) area beneath the marginal cost of pollution abatement curve up to QX.

72) Refer to Figure 17-4. There is an emissions tax of $t per unit of pollution. Which of the following statements regarding the pollution abatement activities by the two firms is correct?

A) It is not socially optimal to have Firm X doing pollution abatement of QX while Firm Y does the lesser amount, QY.

B) It is efficient for Firm Y to do less pollution abatement than Firm X because Firm Y faces higher costs of abatement.

C) The emissions tax causes no change in the firms’ polluting activity.

D) The shaded areas in the two graphs depict the social costs of pollution caused by Firms X and Y.

E) The emissions tax causes an optimal level of pollution.

73) Refer to Figure 17-4. There is an emissions tax of $t per unit of pollution. The resulting amount of pollution abatement is socially optimal if

A) Firm X abates QX and Firm Y abates QY.

B) each firm abates at QR.

C) the emissions tax causes no change in firms’ polluting activity.

D) the emissions tax is equal to the marginal social cost of pollution.

E) each firm pays the maximum amount of tax.

74) A pollution-control policy that, in principle, can perfectly internalize pollution externalities is

A) emission limits.

B) fines for firms that pollute over a certain amount.

C) an emissions tax.

D) moral suasion.

E) None of the above can internalize the externality.

75) Suppose the government imposes a tax for each unit of pollution that a firm produces. The firm will

A) stop producing altogether.

B) reduce emissions until the marginal cost of any further reduction in pollution is equal to or greater than the tax.

C) reduce emissions until the marginal cost of any further reduction in pollution is equal to the price of the firm’s product.

D) increase output such that the additional revenue can offset this additional tax payment.

E) ignore the tax and continue to produce the same amount of output.

76) The use of emissions taxes as a method of reducing pollution

1) is more efficient than direct controls;

2) allows firms to select the most efficient abatement techniques;

3) forces firms to internalize the pollution externality.

A) 1 only

B) 1 and 2 only

C) 1 and 3 only

D) 2 and 3 only

E) 1, 2, and 3

77) Suppose a per-unit tax is imposed on a firm’s output which makes the marginal private cost of production equal to the marginal social cost. In this case, we can then say that

A) the externality has been fully internalized for that firm.

B) the firm will make losses as its costs have increased.

C) the internality has been externalized for that firm.

D) the firm will be forced by the extra cost burden to leave the industry.

E) the firm will not make any changes to its output decision.

78) If residential garbage collection were financed by charging households a fee per unit of garbage collected, rather than through general property taxation or a flat fee, you would expect

A) less concern about recycling and more concern about the high cost of garbage collection.

B) more recycling as households seek to minimize their garbage-collection bill.

C) higher costs for the municipality providing the garbage-collection service.

D) the administration cost to outweigh any other savings, thus rendering this idea inefficient.

E) inadequate revenue to pay for the garbage collection.

79) A potential disadvantage of emissions taxes versus direct pollution controls is that

A) emissions taxes do not specify how the pollution is to be controlled, which leads to economic inefficiency in the implementation of the pollution restraint.

B) pollution becomes a part of each firm’s profit-maximizing calculations, encouraging firms to find more efficient ways to pollute.

C) the authorities might have a better idea of the socially optimal level of pollution than of the optimal tax rate that would achieve it.

D) emissions taxes introduce distortions to the price system, whereas direct controls do not.

E) emissions taxes are more expensive to administer.

80) Private and competitive markets could produce efficient levels of pollution if

A) left alone by government regulators.

B) regulated by government through direct controls.

C) the appropriate tax per unit of pollution were administered and enforced.

D) the producers were made aware of the pollution externality.

E) the worst polluting firms were closed down.