chapter 12

While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to

 

a range of more flexible, market-oriented pollution control policies.

The objective of imposing a higher pollution tax is to

 

provide adequate incentive for firms to reduce their emissions by more.

If pollutants are emitted into the air and water, what costs might be incurred as a result?

 

health injuries and all of the above

Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits.

 

fails to allocate resources efficiently

Why do U.S. economists commonly refer to externalities as an example of market failure?

 

externalities present a case where markets only consider some social costs

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day

 

would be a negative externality.

Marketable permits can be viewed as a form of improved__________________.

 

property rights

While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because

 

it is full of fine print and exceptions, and costly for some firms to comply with.

Using the term "spillover" is a less formal means of describing

 

an externality.

Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies?

 

it isn't required to pay any of the cost of cleaning up its pollution

An economist is more likely to identify__________________as a more efficient and flexible way for society to__________________.

 

marketable permits; allow a limited, declining amount of pollution to occur

The arguments presented by economists regarding U.S. environmental command-and-control regulations generally

 

lack flexibility and a and b above.

Which of the following would be classified as a situation where a third-party benefits from a market transaction by others?

 

Homeowner's property values rise because a neighboring city expands its downtown shopping district using taxpayer dollars from the neighboring city

The term ______________________ refers to a market exchange that affects a third party who is outside or external to the exchange.

spillover