SOLUTIONS TO SELF-QUESTIONS

11.1 The Economics of Pollution

1. An externality occurs when the full cost or benefit of a good is not borne by the producers and consumers of that good.
2. 1. 1. positive externality
      2. negative externality
      3. positive externality
      4. negative externality
      5. negative externality

11.2 Command-and-Control Regulation

1. A command and control regulation simply dictates the amount of production firms can engage in, in order to produce the socially optimal quantity of a good.
2. These regulations create no incentive for companies to reduce pollution below a minimum standard, they make no distinction between firms that can easily reduce pollution and those that cannot, and they are subject to political lobbying and loopholes.

11.3 Market-Oriented Environmental Tools

1. 1. 1. market-based
      2. command-and-control
      3. command-and-control
      4. market-based
      5. market-based

11.4 The Benefits and Costs of U.S. Environmental Laws

1. Zero pollution is not an optimal goal because the costs of eliminating all pollution would greatly outweigh the benefits of allowing a small amount.
2. It is not, because the costs of not polluting at all would be far higher than the benefits. We would have to abandon virtually all modern technology in order to achieve such a goal, which would have devastating economic consequences, whereas a small amount of pollution necessary for modern life is a comparatively small cost.

11.5 International Environmental Issues

1. High-income countries often agree to help low-income countries cover the cost of their pollution through tourism and sharing technology.
2. Low-income countries argue that they do not have the luxury of worrying about the environment too much, when their people are starving. For these countries, economic development is the number one priority.

11.6 The Trade-off between Economic Output and Environmental Protection

1. Each combination represents an efficient level of environmental protection and economic production such that you could not get more of one without losing some of the other.
2. Such a point indicates that either more environmental protection or more economic production could be achieved at no additional cost.