Public goods, and costs or benefits that fall on others

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Cards A to C on limiting pollution (card A is exact; cards B and C are made up). Card A, "The Acid Rain Program". Who made it: the Environmental Protection Agency (epa.gov), read November 14, 2026. Excerpt 1: "The ARP was the first national cap and trade program in the country" Excerpt 2: "introduced a system of allowance trading that uses market-based incentives to reduce pollution." Excerpt 3: "the final 2010 SO2 cap set at 8.95 million tons, a level of about one-half of the emissions from the power sector in 1980." Card B, "Two plants (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: Plant X and Plant Y each now emit 100 tons a year. A cap limits the two together to 160 tons. Cutting a ton costs Plant X $50 and costs Plant Y $200. Plant Y stands next to a town. Plant X is far from any town. Under Rule 1 each plant must cut 20 tons. Under Rule 2 each plant gets allowances for 80 tons and may sell or buy allowances. Card C, "A critic (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: Trading lets a plant buy the right to pollute, so a trading plan allows more pollution than a fixed rule.

2. 1.

   Pia compares Rule 1 and Rule 2 on card B. What does each cost the two plants in cutting, and how much do they emit?

   • Rule 1 costs $5,000 and Rule 2 costs $2,000, and both hold the total to 160 tons
   • Rule 1 costs $5,000 and Rule 2 costs $2,000, and Rule 2 holds the total to 120 tons
   • Rule 1 costs $2,000 and Rule 2 costs $5,000, and both hold the total to 160 tons
   • Rule 1 costs $5,000 and Rule 2 costs $2,000, but Rule 2 lets the total rise above 160 tons
3. 2.

   Someone says Rule 2 is better in every way. What is Tala's strongest objection from card B?

   • Rule 2 lets the total rise above 160 tons, since plants can buy extra allowances from X
   • Plant X must cut 40 tons, which costs it $2,000, so the cost to Plant X is very large
   • Rule 2 saves nothing, since Plant Y pays Plant X what the cut would have cost Plant Y
   • The cap limits total tons, not where: Plant Y can keep emitting 100 tons next to a town
4. 3.

   Milo asks what evidence would best test a cap and trade plan like the Acid Rain Program. What is missing?

   • The cost of cutting a ton at one plant, which card B already gives for both plants
   • How many allowances the EPA gave out in 1980, before the program had even begun
   • Yearly emissions against the cap, and whether harm near the heaviest emitters grew
   • The market price of allowances in a single week, to compare with $50 and $200 a ton

5. Use this

   Cards A to C on a tax on a polluting good (all made up). Card A, "The good and the tax (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: The good sells for $4.00 a unit. A tax of $1.00 a unit is added. Demand has an elasticity of 0.4 and supply an elasticity of 1.2, both written as positive numbers. In a simple model, buyers bear the share Es ÷ (Ed + Es) of a tax, and sellers bear the rest. A percent fall in quantity equals the elasticity of demand times the percent rise in the price buyers pay. Card B, "Two households (made up)". Who made it: written for this sheet. Table, columns Household | Share of income spent on the good: low income | 3 percent; high income | 1 percent. Card C, "A claim (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: A tax that adds $1.00 to a $4.00 good will cut its use, and its pollution, by a quarter. Everyone pays the same tax on each unit, so it is fair.

6. 4.

   Ren tests the first half of the claim on card C against card A. What is the verdict?

   • Right: a $1.00 tax on a $4.00 good is a 25 percent rise, so use falls by a quarter too
   • Overstated: the tax would cut use by half, since the supply elasticity is 1.2 for sellers
   • Overstated: the buyers' price rises about 19 percent, so quantity falls only about 7.5 percent
   • Wrong: the tax does not change use, since demand is inelastic and buyers keep buying
7. 5.

   Luz answers the second half of the claim on card C, that an equal tax per unit is fair. What is the strongest objection from card B?

   • A tax on a good is unfair to a household, since a household buys the good at some point
   • It weighs three times as much on low incomes, which spend 3 percent of income on it against 1
   • The tax raises prices for sellers as well as buyers, so both groups of households lose out
   • High incomes spend 1 percent of income on the good, so they pay the larger share of income
8. 6.

   Noah asks what the cards leave out about whether the tax is fair. Which missing fact matters most?

   • What the government does with the revenue, since a rebate could offset the burden
   • How much pollution the good makes in each unit, since that sets the right tax
   • Whether the good is sold in cans or in bottles, since packaging changes the price
   • Whether the $4.00 price is the same in each town, to check the 25 percent rise

9. Use this

   Cards A to D on a shared lake (cards A, B and D are made up; card C is a citation). Card A, "A lake fishery (made up)". Who made it: written for this sheet. Table, columns Boats | Total catch (tons): 1 | 30; 2 | 50; 3 | 60; 4 | 64. Each boat costs the equivalent of 18 tons of fish a season to run. Card B, "Open access (in our words)". Who made it: written for this sheet. Summary in our words, not a quotation: A new boat enters while the catch per boat is at least the cost of running a boat. Nobody can be kept off the lake. Card C, "Elinor Ostrom". Who made it: the Royal Swedish Academy of Sciences, 2009. Excerpt: "for her analysis of economic governance, especially the commons". She shared the 2009 prize with Oliver Williamson. Her best-known book, Governing the Commons (1990), described groups that managed shared resources by rules they made themselves. Card D, "A claim (made up)". Who made it: written for this sheet. Summary in our words, not a quotation: A shared resource is ruined unless it is privatized or run by the state.

10. 7.

    Kira applies card B to card A. How many boats enter, how many would be best, and how does the catch net of cost compare?

    • 2 boats enter, but 3 would leave a net catch of 14 tons against 6 for two
    • 3 boats enter, and 3 is the right number, since the net catch of 6 tons is above zero
    • 4 boats enter, and 3 would leave a net catch of 6 tons against −8 for four
    • 3 boats enter, but 2 would leave a net catch of 14 tons against 6 for three boats
11. 8.

    A reader says open access is fine, since the fish are caught either way. What is Zee's strongest objection?

    • The 2nd boat adds 20 tons, which is more than the 18 it costs, so it should stay out
    • The 4th boat adds 4 tons, so a 4th boat will enter and lower the net catch further
    • The 3rd boat adds just 10 tons for a cost of 18, and it lowers the catch per boat
    • The lake is public, so fish taken by one boat cannot harm the others
12. 9.

    Ari tests the claim on card D against card C. What is the verdict?

    • Strong: the lake on card A is ruined with 3 boats, which supports the claim for commons in general
    • Weak: card C describes groups that managed commons by their own rules, so ruin is not certain
    • Strong: card C gives a prize, which shows that economists accept the claim as sound
    • Weak: card C says privatizing a resource works, so the state has no part to play in it
13. 10.

    Milo asks what evidence would best test whether self-made group rules protect a commons. What is missing?

    • How many self-ruled groups kept their resource, against similar open-access groups
    • Whether Ostrom shared the prize with Oliver Williamson, which card C already says
    • How many fish a boat catches in a season, which card A already gives for the made-up lake
    • What a boat costs to run, since that decides whether groups can afford to make rules