1. Compared to a pollution tax, a uniform-abatement policy is _________ (more/less) efficient because it does not exploit differences in ________across firms.
2. The command part of a command-and-control pollution policy specifies a ________for each firm.
3. A command-and-control policy is likely to be inefficient because it requires firms to use ________.
4. A pollution tax encourages firms to develop more efficient abatement technology. ________ (True/False)
5. Arrows up or down: A switch from a pollution-tax policy to a uniform-reduction policy will shift the supply curve of the polluting product ________and ________the equilibrium price.
6. The lesson from the Dear Abby column is that sometimes ________is more efficient than ________, and sometimes the reverse is true.
7. The cost of removing mercury-containing switches in automobiles prior to incineration is ________ (greater/less) than the cost of a system that prevents mercury releases during incineration.
8. Options for Abating Noise Pollution. Janis enjoys loud music and is willing to pay $9 for the first song and $1 less for each succeeding song ($8 for the second, $7 for the third, and so on). For her dormmates, the external cost from the noise pollution is $4 per song.
a. Suppose initially the price of songs is $0. How many songs will Janis play? Illustrate with a graph.
b. Suppose the government imposes a pollution tax of $4 per song. How many songs will Janis play? Compute the loss in consumer surplus from the tax, which increases the price of songs from $0 to $4.
c. Janis could soundproof her room, eliminating the noise pollution and her responsibility to pay the pollution tax. If the soundproofing costs $30, is it worthwhile?
d. Janis could compensate her dormmates for each unit of noise pollution each song played. How much compensation would be required? From her perspective, is paying compensation better than paying the tax, worse, or the same?
9. Regulations Eliminate a Market? Consider a market in which the initial equilibrium quantity of a polluting good is 20 tons.
a. Use a graph to show the effects of a pollution tax that decreases the equilibrium quantity to 12 tons.
b. Consider a command-and-control policy that generates the same volume of pollution as the pollution tax but decreases the equilibrium quantity of the polluting good to zero. Use a graph to show the effects of the command-and-control policy.