Question 1

To achieve the socially optimal level of pollution, the biggest polluters should be targetted for the greates reduction in pollution.

Accepted Answer

A) True 
 B)False

Question 2

Private markets can allocate resources optimally

Accepted Answer

A)  under all circumstances 
B)  only if property rights are well defined and can be easily enforced 
C)  whenever property rights are well defined, regardless of whether they can be easily enforced 
D)  whenever property rights can be easily enforced, regardless of whether they are well defined 
E)  whenever there is no government intervention in the market 
A)  under all circumstances 
B)  only if property rights are well defined and can be easily enforced 
C)  whenever property rights are well defined, regardless of whether they can be easily enforced 
D)  whenever property rights can be easily enforced, regardless of whether they are well defined 
E)  whenever there is no government intervention in the market

Question 3

Exhibit 17-9  
-In Exhibit 17-9, the welfare loss (from society's perspective) that results from 6 units of water quality is shown by area

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000 
E)  $25,000 
A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000 
E)  $25,000

Question 4

Markets for pollution rights

Accepted Answer

A)  have never been tried in the United States 
B)  assign property rights to those who value them least 
C)  allow the government to assign property rights 
D)  enable those who value them most to pollute 
E)  are less efficient than pollution standards 
A)  have never been tried in the United States 
B)  assign property rights to those who value them least 
C)  allow the government to assign property rights 
D)  enable those who value them most to pollute 
E)  are less efficient than pollution standards

Question 5

The price of a pollution right is

Accepted Answer

A)  determined by consumers 
B)  determined by government 
C)  a user charge 
D)  determined by supply and demand 
E)  a subsidy 
A)  determined by consumers 
B)  determined by government 
C)  a user charge 
D)  determined by supply and demand 
E)  a subsidy

Question 6

Marginal external costs are

Accepted Answer

A)  additional unpriced costs imposed on society by producing one more unit of a good 
B)  the cost of damaged goods 
C)  the additional cost of imported goods 
D)  the total cost to society of producing a good 
E)  the marginal cost divided by the marginal revenue 
A)  additional unpriced costs imposed on society by producing one more unit of a good 
B)  the cost of damaged goods 
C)  the additional cost of imported goods 
D)  the total cost to society of producing a good 
E)  the marginal cost divided by the marginal revenue

Question 7

As more pollution is abated, the marginal social benefit from further abatement diminishes.

Accepted Answer

A) True 
 B)False

Question 8

Exhibit 17-7  
-Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers base their driving decisions on the marginal social cost of driving their cars, how many miles will they drive?

Accepted Answer

A)  1,000 miles 
B)  2,000 miles 
C)  3,000 miles 
D)  4,000 miles 
E)  5,000 miles 
A)  1,000 miles 
B)  2,000 miles 
C)  3,000 miles 
D)  4,000 miles 
E)  5,000 miles

Question 9

Which of the following is most likely to happen to open-access wildlife resources?

Accepted Answer

A)  They will be used efficiently. 
B)  They will not be used at all. 
C)  It will be unprofitable to use them. 
D)  They will be used but will generate no profit. 
E)  They will become extinct. 
A)  They will be used efficiently. 
B)  They will not be used at all. 
C)  It will be unprofitable to use them. 
D)  They will be used but will generate no profit. 
E)  They will become extinct.

Question 10

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans, chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

Accepted Answer

A) True 
 B)False

Question 11

A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. It would cost the factory $5 million to move; it would cost $1 million for the day care center to move. Sound insulation for the factory costs $1 million; insulation for the day care center costs $200,000. The court initially determines that the day care center has the property right and orders the factory to purchase insulation for the day care. But on appeal the factory is awarded the property right. How would the optimal solution to this problem change after the appeals court decision?

Accepted Answer

A)  The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation, a result consistent with the Coase theorem. 
A)  The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation, a result consistent with the Coase theorem.

Question 12

In the U.S., people tend to discard items rather than repair them because

Accepted Answer

A)  Americans are lazy 
B)  of the high opportunity cost of time 
C)  it is costly to use land for waste disposal 
D)  high wages in the waste disposal industry discourages repairs 
E)  low wages in the repair industry encourages disposal 
A)  Americans are lazy 
B)  of the high opportunity cost of time 
C)  it is costly to use land for waste disposal 
D)  high wages in the waste disposal industry discourages repairs 
E)  low wages in the repair industry encourages disposal

Question 13

Which of the following provides a positive externality?

Accepted Answer

A)  smog 
B)  inoculating children against measles 
C)  hamburgers 
D)  litter 
E)  an increase in your earnings 
A)  smog 
B)  inoculating children against measles 
C)  hamburgers 
D)  litter 
E)  an increase in your earnings

Question 14

In Japan, recycling is prevalent and landfill use is small relative to the United States because

Accepted Answer

A)  the Japanese are more conscientious 
B)  there is no externality problem there 
C)  land is relatively more scarce in Japan 
D)  the Japanese have better recycling technology 
E)  littering is illegal there 
A)  the Japanese are more conscientious 
B)  there is no externality problem there 
C)  land is relatively more scarce in Japan 
D)  the Japanese have better recycling technology 
E)  littering is illegal there

Question 15

Economists view pollution as an economic problem that arises because

Accepted Answer

A)  private enterprise always minimizes the amount of pollution produced 
B)  profitable firms rarely pollute 
C)  as the economy grows, the level of pollution declines 
D)  firms that pollute do not pay the full social cost of producing their output 
E)  pollution costs are borne by the consumer 
A)  private enterprise always minimizes the amount of pollution produced 
B)  profitable firms rarely pollute 
C)  as the economy grows, the level of pollution declines 
D)  firms that pollute do not pay the full social cost of producing their output 
E)  pollution costs are borne by the consumer

Question 16

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

Accepted Answer

A)  a paper mill that pollutes a river 
B)  a person who throws a beer can out the window of a moving car 
C)  cars, which emit carbon monoxide 
D)  a solar water heater which is outside and obscure from view 
E)  products that contribute to the greenhouse effect 
A)  a paper mill that pollutes a river 
B)  a person who throws a beer can out the window of a moving car 
C)  cars, which emit carbon monoxide 
D)  a solar water heater which is outside and obscure from view 
E)  products that contribute to the greenhouse effect

Question 17

It is in the long-run economic interest of the world to preserve rainforests, but it is not in the short-run economic interest of the inhabitants of the countries involved to do so.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following has not contributed to the high rate of tropical deforestation?

Accepted Answer

A)  a lack of property rights to forests and trees 
B)  a shortage of farmland 
C)  banks' forgiveness of the debts of less-developed economies 
D)  high demand for lumber 
E)  high demand for beef and other ranch products 
A)  a lack of property rights to forests and trees 
B)  a shortage of farmland 
C)  banks' forgiveness of the debts of less-developed economies 
D)  high demand for lumber 
E)  high demand for beef and other ranch products

Question 19

Exhibit 17-7  
-Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers base their driving decisions on the marginal social cost of driving their cars, what would be the social gain?

Accepted Answer

A)  $150 
B)  $200 
C)  $250 
D)  $300 
E)  $350 
A)  $150 
B)  $200 
C)  $250 
D)  $300 
E)  $350

Question 20

The socially optimal level of output of a good with an externality occurs when

Accepted Answer

A)  the marginal private costs of production are equal to marginal private revenues 
B)  the firm maximizes its profits 
C)  the consumer maximizes his or her utility 
D)  the marginal social cost of production equals the marginal social benefit of the good 
E)  the firm is making a normal profit 
A)  the marginal private costs of production are equal to marginal private revenues 
B)  the firm maximizes its profits 
C)  the consumer maximizes his or her utility 
D)  the marginal social cost of production equals the marginal social benefit of the good 
E)  the firm is making a normal profit

Exam 17: Externalities and the Environment

To achieve the socially optimal level of pollution, the biggest polluters should be targetted for the greates reduction in pollution.

Private markets can allocate resources optimally

Exhibit 17-9 -In Exhibit 17-9, the welfare loss (from society's perspective) that results from 6 units of water quality is shown by area

Markets for pollution rights

The price of a pollution right is

Marginal external costs are

As more pollution is abated, the marginal social benefit from further abatement diminishes.

Exhibit 17-7 -Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers base their driving decisions on the marginal social cost of driving their cars, how many miles will they drive?

Which of the following is most likely to happen to open-access wildlife resources?

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans, chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

In the U.S., people tend to discard items rather than repair them because

Which of the following provides a positive externality?

In Japan, recycling is prevalent and landfill use is small relative to the United States because

Economists view pollution as an economic problem that arises because

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

It is in the long-run economic interest of the world to preserve rainforests, but it is not in the short-run economic interest of the inhabitants of the countries involved to do so.

Which of the following has not contributed to the high rate of tropical deforestation?

Exhibit 17-7 -Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers base their driving decisions on the marginal social cost of driving their cars, what would be the social gain?

The socially optimal level of output of a good with an externality occurs when

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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