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Microeconomics

1. The efficient amount of pollution control is:

a) the amount for which the total social benefit equals the total social cost of pollution.
b) the amount for which the marginal social benefit equals the marginal social cost of pollution.
c) always zero.
d) always 100% abatement.

2. In November 2004, the Environment Ministry in Japan proposed a new carbon tax in order to meet Japan's obligations to reduce carbon dioxide emissions under the Kyoto Treaty. The tax would be levied on producers and importers of fossil fuels and raise the cost of using fossil fuels. How do most economists view a tax such as this?

a) They prefer direct regulation to taxes because taxes create deadweight loss.
b) They prefer voluntary programs to taxes because they reduce the role of compulsion.
c) They do not believe any government intervention is necessary because the invisible hand of the market will correct the problem.
d) They support taxes on pollution as a way of making decision makers consider all costs.
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