Question

1)Pollution-abatement expenditures are

taxes on companies that produce pollution.

a method of defining private property rights.

the same as tradable permits.

the costs of reducing pollution.

a private remedy.

2)A tradable permit

is a charge made to firms that pollute the environment based on the pollution quantity they emit.

allows a firm to emit a certain, limited amount of pollutants into the atmosphere.

forces a firm to meet a certain standard.

allows a decrease in tax payments for firms that pollute.

enables firms to reduce pollution at the expense of the government.

3)In order to determine the quantity of a government-provided service that should be produced, one should consider the

price minus the average cost of the service.

marginal cost and benefit of the service.

total cost and benefit of the service.

average cost and benefit of the service.

marginal benefit and average cost of the service.

Answer 1

1) Pollution abatement expenditure means cost incurred to reduce pollution. The fourth option is correct.

2) A tradable permit is introduced for reducing pollution. A maximum level of pollution is set by the government. And permits are given for that maximum level of pollution, allowing the industries for trade these permit. So the industries have to pay according to their emission level. The first option is correct.

3) The quantity of government provided service should be at the intersection of marginal cost and benefit of the service. The second option is correct.