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.
    

Questions:
Right
Wrong
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