1. The Capture Theory of Regulation is...
   a theory in which firms have an incentive to capture the regulatory process because each firm potentially bears a high cost if regulation is enacted.
   a theory depicting the ability of the regulatory process to capture polluters in the industrial sector and impose heavy sanctions on them.
   a theory in which diffuse citizen activists capture the regulatory process because each individual has only a very small cost to bear.
   a theory that explains the objective of regulation in terms of serving the public interest.
   

2. One method of governing CPRs is to require all appropriators to cut back by the same absolute amount. If this scenario involves appropriators who have historically been appropriating widely different amounts of resource, what will the effect be on them?
   The larger appropriators will be cutting back by a larger percentage than the smaller appropriators, therefore wealth is being redistributed from the large appropriators to the smaller ones.
   The smaller appropriators will be cutting back by a larger percentage than the larger appropriators, therefore wealth is being redistributed from the small appropriators to the larger ones.
   There is a neutral reduction between the two (each are reducing by the same percentage), therefore there is no redistribution of wealth.
   The intermediate-sized appropriators will be made worse off than both the large and the small appropriators.
   

3. True or false: In "Olsonian" regulatory situations, stable systems of regulation are the predicted outcome?
   True.
   False.
   

4. Which of the following is evidence supporting the capture theory of regulation, as envisioned by Stigler?
   Revolving door deals in which EPA administrators leave their positions and find high level jobs for firms in the very industry they used to regulate. These former administrators can then use their EPA connections to help their employers influence (or avoid) regulation.
   EPA administrators making decisions in the best interests of the public.
   Industry trade groups working in cooperation with environmental, labor, and consumer groups.
   None of the above.
   

5. Compute the expected sanction if the sanction from polluting is $5 million, the probability of detection is 60%, and the probability of being sanctioned given detection is 50%.
   5 million.
   4 million.
   2 million.
   1.5 million.
   

6. Using the probability information from question 5, if a firm can save $9 million by being out of compliance, what is the minimum sanction sufficient to successfully create deterrence?
   10 million.
   15 million.
   30 million.
   35 million.
   

7. Again assuming a firm can save $9 million by being out of compliance, but now changing the probability of detection to 100% (the probability of being sanctioned given detection remains 50%), what is the minimum sanction sufficient to successfully create deterrence?
   5 million.
   9 million.
   18 million.
   27 million.
   

8. True or false: Fines may be shifted (at least in part) from firms to insurers, consumers, or taxpayers, but incarceration cannot.
   True.
   False.
   

9. Which of the following highlights one of the problems with incarceration as a form of criminal sanction:
   In the past, judges have been excessively strict, sentencing environmental offenders to long terms in maximum security prison.
   Criminal sanctions carry a lower burden of proof than do monetary penalties from civil law suits.
   Incarceration has a lower social cost than do fines.
   None of these above.
   

10. Market reputation is most likely to induce deterrence in an environmental context when which of the following are true?
    When a large number of citizens care about the environment, and acceptable substitute products are available.
    The costs of organizing environmental boycotts are low.
    Companies place a high value on future business.
    All of the above.
    

11. The purpose of the EPAs Environmental Leadership Program (ELP) is to...
    increase criminal penalties and financial sanctions on environmental offenders.
    determine the feasibility developing standards and procedures for performing environmental audits on firms using private, "third-party" auditors paid for by the firms themselves.
    create more stringent pollution-control standards for industry to follow.
    Create a new generation of technology-forcing regulations using technological breakthroughs developed by innovative industry members.
    

12. Choose the entry below that is NOT an enforcement tool available to the EPA.
    Impose administrative fines.
    Inspect firms.
    Request that firms provide data.
    Impose criminal penalties without the involvement of a federal judge.
    

13. True or false: Citizen suits are potentially important because they can help offset the effects of captured regulatory agencies, or leverage undersupported enforcement resources.
    true.
    false.
    

14. Which of the entries below represents an attractive or beneficial aspect of marketable allowance systems?
    Older plants that pollute more and have higher pollution abatement and control costs will usually sell their allowances to firms with lower cleanup costs, which causes emissions reductions to be concentrated on the firms with the highest cleanup costs.
    Marketable allowance systems can result in localized "hot spots," and if low-income people live near these sites, then environmental classism and racism may result.
    Marketable allowance systems harness the cost-minimizing incentives of profit maximizing firms and the competitive market process to reduce the cost of compliance; this occurs when firms with low pollution abatement costs sell allowances to firms with higher abatement costs.
    These systems set specific technological requirements and firm pollution reduction targets for each polluter.
    

15. Which of the following represents a desirable or beneficial dynamic incentive created by marketable allowance systems?
    They give firms an incentive to invest in cleaner technologies so that they can become sellers rather than buyers of costly pollution allowances.
    They set strict pollution-control technology requirements, and so assures long-term compliance.
    They greatly lessen the need for regulatory agencies to monitor emissions, which in turn reduces government expenditures.
    None of the above.
    

16. A potential problem with marketable allowance systems is that...
    they are inconsistent with an overall pollution-reduction target.
    there is no incentive for research and development in low-cost "clean technologies."
    localized hot spots may appear due to a particular firm purchasing a large number of allowances rather than cleaning up.
    All of the above.
    

17. What percentage of sulfur oxide emissions in the U.S. are generated by electric power plants that burn fossil fuels?
    50%
    40%
    60%
    75%
    

18. True or false: It is illegal under the EPA's Acid Rain Program for environmental groups to pool their resources, purchase allowances, and simply retire them, thus preventing those allowances from turning to emissions in that year.
    True.
    False.
    

19. Pollution taxes may take the form of excise taxes. What are excise taxes?
    A flat tax on income.
    A tax on the sale of goods, often times based on a percentage of the value of the good being taxed.
    A tax on corporate capital investments.
    Taxes on the consumption of goods, often times based on the value added at each stage of the production process.
    

20. The international political economy of greenhouse gas control is most closely ________ in nature.
    Stiglarian.
    Olsonian.
    Pigouvian.
    Malthusian.
    

21. Which of the is the largest single source of human-caused greenhouse gas emissions?
    Carbon dioxide.
    Nitrous oxide.
    Halocarbons.
    Methane.
    

22. Which of the following is NOT part of the growing evidence of a warming climate?
    In the northern hemisphere the active growing season has increased by 12 days since the early 80s.
    The tree line in Northern Finland has been progressively moving into former tundra and alpine areas.
    Most desert environments are transforming into lush pastures.
    The freeze line in the atmosphere has risen about 500ft over the last 50 years.
    

23. True or false: If we accept the premise that human activity affects the global climate, then the problem of limiting greenhouse gas emissions is an example of a common-pool resource dilemma.
    True.
    False.
    

24. Which of the following does not complicate policy decisions involving the control of greenhouse gas emissions?
    Assumptions regarding the rate at which low-cost alternative energy technology will be developed.
    Selection of an appropriate discount rate.
    Assumptions regarding the probability and nature of various possible future climate regimes.
    All of the above complicate the policy decisions involving control of greenhouse gases.
    

25. Which country is the second largest emitter of carbon dioxide in the world?
    Poland.
    China.
    Hungary.
    Russia.
    

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