Question

The averting expenditures method

a. uses spending changes on goods that act as substitutes for environmental quality
b. defines personal environmental quality as the relevant market
c. has the disadvantage of jointness of production, which biases the benefit estimate
d. all of the above
e. none of the above

Answer 1

The averting expenditures method encompasses spending on substitute goods for environmental quality, definition of personal environmental quality as the market, and the drawback of jointness of production. The correct answer is 'd. all of the above', aligning with the principle of market-oriented environmental tools for efficiency.

Step-by-step explanation:

The averting expenditures method:

Uses spending changes on goods that act as substitutes for environmental quality.

Defines personal environmental quality as the relevant market.

Has the disadvantage of jointness of production, which biases the benefit estimate.

Hence, the correct answer to the question is d. all of the above

Market-oriented environmental tools are crucial for maintaining the balance between economic output and environmental protection. For instance, inefficiencies like choice M could be avoided, as nations can achieve greater output with the same environmental protection (point Q) or greater environmental protection with the same level of output (point S). This principle is supported by the production possibility frontier (PPF), which showcases the tradeoff and why productivity efficiency is desired.