Question 1

When using the traditional command-and-control approach to environmental regulation, the government attempts to

Accepted Answer

A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement 
B)  determine the most efficient method for different industries 
C)  make allowances for differences across industries and between firms 
D)  set engineering standards that are applicable to all situations and does not recognize unique circumstances 
E)  set a maximum requirement and they allows the individual firm the latitude of choosing the most efficient method 
A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement 
B)  determine the most efficient method for different industries 
C)  make allowances for differences across industries and between firms 
D)  set engineering standards that are applicable to all situations and does not recognize unique circumstances 
E)  set a maximum requirement and they allows the individual firm the latitude of choosing the most efficient method D

Question 2

Deforestation is occurring in tropical areas because

Accepted Answer

A)  long-run economic considerations outweigh short-run considerations 
B)  global economic considerations outweigh domestic considerations 
C)  tropical soil is good for growing farm crops 
D)  the value of jobs created by deforestation exceeds the cost to society 
E)  there is no property right to the earth's climate 
A)  long-run economic considerations outweigh short-run considerations 
B)  global economic considerations outweigh domestic considerations 
C)  tropical soil is good for growing farm crops 
D)  the value of jobs created by deforestation exceeds the cost to society 
E)  there is no property right to the earth's climate E

Question 3

Exhibit 17-4  
-The supply curve in Exhibit 17-4 represents the amount of

Accepted Answer

A)  pollution individuals and firms want to dump into the river 
B)  the river that can still serve as a resource 
C)  pollution the river can accept 
D)  pollution the owner or manager of the resource is willing to clean up 
E)  the pollution-causing good supplied by the industry 
A)  pollution individuals and firms want to dump into the river 
B)  the river that can still serve as a resource 
C)  pollution the river can accept 
D)  pollution the owner or manager of the resource is willing to clean up 
E)  the pollution-causing good supplied by the industry C

Question 4

Which of the following can be a renewable resource?

Accepted Answer

A)  oil 
B)  timber 
C)  coal 
D)  iron ore 
E)  uranium 
A)  oil 
B)  timber 
C)  coal 
D)  iron ore 
E)  uranium

Question 5

The most likely reason why Los Angeles has so much smog is that residents

Accepted Answer

A)  do not have strong, enforceable property rights to rapid transit 
B)  do not have strong, enforceable property rights to clean air 
C)  prefer dirty air to the inconvenience of rapid transit 
D)  prefer dirty air to the inconvenience of carpools 
E)  prefer dirty air to the inconvenience of eliminating smog 
A)  do not have strong, enforceable property rights to rapid transit 
B)  do not have strong, enforceable property rights to clean air 
C)  prefer dirty air to the inconvenience of rapid transit 
D)  prefer dirty air to the inconvenience of carpools 
E)  prefer dirty air to the inconvenience of eliminating smog

Question 6

The optimal level of pollution is

Accepted Answer

A)  zero 
B)  the level at which the marginal social cost of air quality equals the marginal social benefit 
C)  the level at which the average social cost of air quality equals the average social benefit 
D)  the level at which the total social cost of air quality equals the total social benefit 
E)  the level at which the marginal social cost of air quality is minimized 
A)  zero 
B)  the level at which the marginal social cost of air quality equals the marginal social benefit 
C)  the level at which the average social cost of air quality equals the average social benefit 
D)  the level at which the total social cost of air quality equals the total social benefit 
E)  the level at which the marginal social cost of air quality is minimized

Question 7

Exhibit 17-3  
-In Exhibit 17-3, the optimal air quality level is

Accepted Answer

A)  0 
B)  40 
C)  50 
D)  70 
E)  100 
A)  0 
B)  40 
C)  50 
D)  70 
E)  100

Question 8

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. The club could be soundproofed for a cost of $5,000 or move at a cost of $8,000. The class can't soundproof enough to overcome the music, but could be moved for $4,000. According to Coase, a socially optimal solution can be achieved if

Accepted Answer

A)  the local government purchases the building 
B)  the building is torn down 
C)  property rights to be noisy are granted to the nightclub 
D)  property rights to a quiet environment are granted to the meditation class 
E)  both the nightclub and the meditation class relocate 
A)  the local government purchases the building 
B)  the building is torn down 
C)  property rights to be noisy are granted to the nightclub 
D)  property rights to a quiet environment are granted to the meditation class 
E)  both the nightclub and the meditation class relocate

Question 9

A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. What would be the optimal solution to this problem?

Accepted Answer

A)  The factory should move. 
B)  The day care center should move. 
C)  The factory should install sound insulation. 
D)  The day care center should install sound insulation. 
E)  We cannot determine the solution without more information. 
A)  The factory should move. 
B)  The day care center should move. 
C)  The factory should install sound insulation. 
D)  The day care center should install sound insulation. 
E)  We cannot determine the solution without more information.

Question 10

The marginal social cost of air quality increases as air quality increases. If the dirtiest production process would create 700 tons of pollutants, then

Accepted Answer

A)  eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons 
B)  eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons 
C)  more damage will be done by the first 20 tons of pollution than by the last 20 tons 
D)  more damage will be done by the last 20 tons of pollution than by the first 20 tons 
E)  the optimal level of air quality is to reduce pollution by 700 tons 
A)  eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons 
B)  eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons 
C)  more damage will be done by the first 20 tons of pollution than by the last 20 tons 
D)  more damage will be done by the last 20 tons of pollution than by the first 20 tons 
E)  the optimal level of air quality is to reduce pollution by 700 tons

Question 11

Exhibit 17-2  
-In Exhibit 17-2, the total social gain from producing the socially efficient output rather than the private equilibrium output is shown by area

Accepted Answer

A)  abdf 
B)  bed 
C)  bcd 
D)  acdf 
E)  bcde 
A)  abdf 
B)  bed 
C)  bcd 
D)  acdf 
E)  bcde

Question 12

In a free market, a firm's rate of output is determined

Accepted Answer

A)  where marginal social cost equals marginal social benefit 
B)  where marginal private benefit equals marginal social benefit 
C)  where marginal social cost equals marginal private cost 
D)  where marginal private cost equals marginal private benefit 
E)  by government 
A)  where marginal social cost equals marginal social benefit 
B)  where marginal private benefit equals marginal social benefit 
C)  where marginal social cost equals marginal private cost 
D)  where marginal private cost equals marginal private benefit 
E)  by government

Question 13

Exhibit 17-2  
-In Exhibit 17-2, the market equilibrium price and output (determined exclusively by private decisions) are

Accepted Answer

A)  $6 and 50 units, respectively 
B)  $12 and 50 units, respectively 
C)  $12 and 40 units, respectively 
D)  $6 and 40 units, respectively 
E)  not indicated 
A)  $6 and 50 units, respectively 
B)  $12 and 50 units, respectively 
C)  $12 and 40 units, respectively 
D)  $6 and 40 units, respectively 
E)  not indicated

Question 14

If a government regulation states that fluorocarbon emissions should be abated by 75 percent but the optimal level of pollution abatement is 85 percent, which of the following must be true?

Accepted Answer

A)  The free market will not reduce pollution by less than 85 percent. 
B)  The free market will accomplish 85 percent abatement, but it will be inefficient. 
C)  If only 75 percent of the pollution is abated, the society will be better off than if 85 percent had been abated. 
D)  If only 75 percent of the pollution is abated, the society will be worse off than if 85 percent had been abated. 
E)  If 75 percent of the pollution is abated, then in the next period the government should set the abatement level at 95 percent. 
A)  The free market will not reduce pollution by less than 85 percent. 
B)  The free market will accomplish 85 percent abatement, but it will be inefficient. 
C)  If only 75 percent of the pollution is abated, the society will be better off than if 85 percent had been abated. 
D)  If only 75 percent of the pollution is abated, the society will be worse off than if 85 percent had been abated. 
E)  If 75 percent of the pollution is abated, then in the next period the government should set the abatement level at 95 percent.

Question 15

The socially optimal amount of pollution abatement may be less than 100 percent.

Accepted Answer

A) True 
 B)False

Question 16

More water pollution in the United States comes from __________ than any other source.

Accepted Answer

A)  factories 
B)  sulfur dioxide (i.e., acid rain) 
C)  cars 
D)  chemicals (used in pesticides and fertilizers) and sewage 
E)  garbage 
A)  factories 
B)  sulfur dioxide (i.e., acid rain) 
C)  cars 
D)  chemicals (used in pesticides and fertilizers) and sewage 
E)  garbage

Question 17

Marginal social cost is equal to

Accepted Answer

A)  total private cost 
B)  marginal private cost 
C)  marginal external cost 
D)  marginal private cost plus marginal external cost 
E)  marginal private cost divided by marginal external cost 
A)  total private cost 
B)  marginal private cost 
C)  marginal external cost 
D)  marginal private cost plus marginal external cost 
E)  marginal private cost divided by marginal external cost

Question 18

As more pollution is abated, the total social benefit from pollution abatement increases.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 17-3  
-In Exhibit 17-3, the welfare loss (from society's perspective) that results from 70 units of air quality is shown by area

Accepted Answer

A)  edcb 
B)  eda 
C)  bac 
D)  adc 
E)  there is no loss 
A)  edcb 
B)  eda 
C)  bac 
D)  adc 
E)  there is no loss

Question 20

All of the following are examples of negative externalities except one. Which is the exception?

Accepted Answer

A)  water pollution 
B)  your roommate going on a diet 
C)  second-hand smoke 
D)  loud conversation in the workplace 
E)  your neighbor building a bomb shelter on her front lawn 
A)  water pollution 
B)  your roommate going on a diet 
C)  second-hand smoke 
D)  loud conversation in the workplace 
E)  your neighbor building a bomb shelter on her front lawn

Exam 17: Externalities and the Environment

When using the traditional command-and-control approach to environmental regulation, the government attempts to

Deforestation is occurring in tropical areas because

Exhibit 17-4 -The supply curve in Exhibit 17-4 represents the amount of

Which of the following can be a renewable resource?

The most likely reason why Los Angeles has so much smog is that residents

The optimal level of pollution is

Exhibit 17-3 -In Exhibit 17-3, the optimal air quality level is

A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. What would be the optimal solution to this problem?

The marginal social cost of air quality increases as air quality increases. If the dirtiest production process would create 700 tons of pollutants, then

Exhibit 17-2 -In Exhibit 17-2, the total social gain from producing the socially efficient output rather than the private equilibrium output is shown by area

In a free market, a firm's rate of output is determined

Exhibit 17-2 -In Exhibit 17-2, the market equilibrium price and output (determined exclusively by private decisions) are

If a government regulation states that fluorocarbon emissions should be abated by 75 percent but the optimal level of pollution abatement is 85 percent, which of the following must be true?

The socially optimal amount of pollution abatement may be less than 100 percent.

More water pollution in the United States comes from __________ than any other source.

Marginal social cost is equal to

As more pollution is abated, the total social benefit from pollution abatement increases.

Exhibit 17-3 -In Exhibit 17-3, the welfare loss (from society's perspective) that results from 70 units of air quality is shown by area

All of the following are examples of negative externalities except one. Which is the exception?

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix: price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix: Indifference Curves and Utility Maximization

Production and Cost in the Firm

Appendix: a Closer Look at Production and Cost

A: perfect Competition

B: perfect Competition

A: monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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