Costs of Air Pollution

Particular Issues within Environmental Economics

William Nordhaus

The Paradox of Economic Success

A city government is considering several policies to reduce air pollution caused by traffic. From the perspective of a specialist studying the economic impacts of environmental policies, which of the following proposals best represents a market-based approach to solve this problem?

Evaluating Environmental Policies in a Developing Economy

A small bakery operates in a large, competitive market where the established price for a standard loaf of bread is €2.35. The bakery can sell as many loaves as it can produce at this price. If the bakery owner decides to set their price at €2.45 per loaf, what is the most likely outcome for their sales of this bread?

The Economic Rationale for Pollution Levels

A government proposes a new regulation that requires factories to install expensive filtration systems to reduce pollutants discharged into a river. A specialist in the economic impacts of environmental policy is tasked with analyzing this proposal. Which of the following best describes the fundamental trade-off they would evaluate?

From the perspective of a specialist studying the economic impacts of environmental policy, the ideal outcome of any regulation is the complete elimination of the targeted pollutant.

Evaluating the Full Cost of a New Factory

A government is evaluating a proposal to ban a widely-used pesticide that has been shown to harm local bee populations, which are crucial for pollinating nearby fruit farms. However, the pesticide is inexpensive and significantly increases crop yields for the farmers who use it. From the perspective of a specialist studying the economic impacts of environmental policy, which of the following best frames the central question for determining if the ban is economically sound?

Match each type of environmental policy instrument with its corresponding description of how it functions.