Question 1

Most waste generated in the U.S. ends up in landfills because

Accepted Answer

A)  the low opportunity cost of time discourages recycling 
B)  Americans earn low incomes 
C)  the price of land is relatively low 
D)  the low wages in the repair industry encourages repairs 
E)  of low productivity and high wages in the waste disposal industry 
A)  the low opportunity cost of time discourages recycling 
B)  Americans earn low incomes 
C)  the price of land is relatively low 
D)  the low wages in the repair industry encourages repairs 
E)  of low productivity and high wages in the waste disposal industry

Question 2

The marginal social benefit curve for water quality slopes downward because

Accepted Answer

A)  the total benefit from clean water decreases as water becomes cleaner 
B)  the added benefit from cleaner water is greater when water quality is poor than when water quality is high 
C)  the added benefit from cleaner water is smaller when water quality is poor than when water quality is high 
D)  the total benefit from clean water increases as water becomes cleaner 
E)  people demand clean water at any price 
A)  the total benefit from clean water decreases as water becomes cleaner 
B)  the added benefit from cleaner water is greater when water quality is poor than when water quality is high 
C)  the added benefit from cleaner water is smaller when water quality is poor than when water quality is high 
D)  the total benefit from clean water increases as water becomes cleaner 
E)  people demand clean water at any price

Question 3

When consumption of a good or service produces benefits or costs that are not reflected in the market price for the good, this is known as a(n)

Accepted Answer

A)  externality 
B)  common pool problem 
C)  nonexcludable resource 
D)  public good 
E)  renewable resource 
A)  externality 
B)  common pool problem 
C)  nonexcludable resource 
D)  public good 
E)  renewable resource

Question 4

Exhibit 17-8  
-Exhibit 17-8 represents the consumer market for higher education. If people base their education decisions on the marginal social benefit of education, what would be the social gain?

Accepted Answer

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

Question 5

Open-access resources tend to be

Accepted Answer

A)  conserved 
B)  taxed 
C)  overused 
D)  efficiently used 
E)  used in an environmentally sound manner 
A)  conserved 
B)  taxed 
C)  overused 
D)  efficiently used 
E)  used in an environmentally sound manner

Question 6

Based on 2005 data what country is the worlds leading recycler?

Accepted Answer

A)  Germany 
B)  United States 
C)  Japan 
D)  Ireland 
E)  Canada 
A)  Germany 
B)  United States 
C)  Japan 
D)  Ireland 
E)  Canada

Question 7

Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal __________ is __________ __________ his personal marginal __________.

Accepted Answer

A)  cost, greater than, benefit 
B)  benefit, greater than, cost 
C)  cost, equal to, benefit 
D)  benefit, less than, cost 
E)  benefit, equal to, cost 
A)  cost, greater than, benefit 
B)  benefit, greater than, cost 
C)  cost, equal to, benefit 
D)  benefit, less than, cost 
E)  benefit, equal to, cost

Question 8

Which of the following could not have caused the increase in demand indicated in Exhibit 17-4?

Accepted Answer

A)  new firms located on the river 
B)  the pollution was discovered to be more hazardous than had previously been supposed 
C)  the cost of pollution abatement equipment rose 
D)  consumers wanted to buy more of the good produced by the polluters 
E)  the government subsidized firms so they could better afford to buy pollution rights 
A)  new firms located on the river 
B)  the pollution was discovered to be more hazardous than had previously been supposed 
C)  the cost of pollution abatement equipment rose 
D)  consumers wanted to buy more of the good produced by the polluters 
E)  the government subsidized firms so they could better afford to buy pollution rights

Question 9

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it, social welfare is

Accepted Answer

A)  increased by reducing output 
B)  decreased by expanding output 
C)  unchanged by expanding or reducing output 
D)  increased by expanding output 
E)  maximized 
A)  increased by reducing output 
B)  decreased by expanding output 
C)  unchanged by expanding or reducing output 
D)  increased by expanding output 
E)  maximized

Question 10

Exhibit 17-7  
-Exhibit 17-7 represents the consumer market for driving their automobiles. If drivers base their driving decisions only on the marginal private 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 11

Mountain bikers and rollerbladers share the only trail in a city park. The city allows everybody into the park and onto the trail. The mountain bikers say the rollerbladers are a hazard to them; the rollerbladers say it's the other way around. Frequently there are collisions and many injuries occur. Which of the following ways of dealing with the problem does not implicitly grant someone a property right?

Accepted Answer

A)  Allow bikers to use the trail on odd-numbered days and rollerbladers to use it on even-numbered days. 
B)  Allow bikers to use the trail in the morning and rollerbladers to use it in the afternoon. 
C)  Allow only bikers in the park because they have invested in the more expensive sports equipment. 
D)  Kick everybody out of the park. 
E)  Build another trail, put rollerbladers on one and bikers on the other, and give bikers the right-of-way at intersections. 
A)  Allow bikers to use the trail on odd-numbered days and rollerbladers to use it on even-numbered days. 
B)  Allow bikers to use the trail in the morning and rollerbladers to use it in the afternoon. 
C)  Allow only bikers in the park because they have invested in the more expensive sports equipment. 
D)  Kick everybody out of the park. 
E)  Build another trail, put rollerbladers on one and bikers on the other, and give bikers the right-of-way at intersections.

Question 12

If production is characterized by variable technology, the optimal level of air quality occurs where

Accepted Answer

A)  the marginal private cost of air quality equals the marginal social benefit 
B)  the marginal social cost of air quality equals the marginal social benefit 
C)  the marginal social cost of air quality equals the marginal private cost of air quality 
D)  government regulators set it 
E)  all costs are absorbed by the polluter 
A)  the marginal private cost of air quality equals the marginal social benefit 
B)  the marginal social cost of air quality equals the marginal social benefit 
C)  the marginal social cost of air quality equals the marginal private cost of air quality 
D)  government regulators set it 
E)  all costs are absorbed by the polluter

Question 13

Exhibit 17-3  
-In Exhibit 17-3, the optimal air quality level is where the MSB=MSC.

Accepted Answer

A) True 
 B)False

Question 14

The band Coldplay's funding of 10,000 mango trees in India to help sop up emissions related to the release of their CD, A Rush of Blood to the Head, is an example of fixed-production technology.

Accepted Answer

A) True 
 B)False

Question 15

The equilibrium price and quantity in a free market usually reflect private marginal costs and benefits, not social ones.

Accepted Answer

A) True 
 B)False

Question 16

Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 17-6  
-In Exhibit 17-6, an unregulated market would produce

Accepted Answer

A)  0 units 
B)  10 units 
C)  20 units 
D)  40 units 
E)  50 units 
A)  0 units 
B)  10 units 
C)  20 units 
D)  40 units 
E)  50 units

Question 18

If consumption of education creates a positive externality, then in order to increase efficiency relative to the outcome determined by private decisions,

Accepted Answer

A)  more education must be produced 
B)  the same amount of education must be produced, and the price should be lower 
C)  less education must be produced, and the price should be higher 
D)  less education must be produced, and the price should be lower 
E)  less education must be produced at the same price 
A)  more education must be produced 
B)  the same amount of education must be produced, and the price should be lower 
C)  less education must be produced, and the price should be higher 
D)  less education must be produced, and the price should be lower 
E)  less education must be produced at the same price

Question 19

Fishing, the lumber industry, tourism, and even city buildings in Canada are harmed by acid rain, most of which comes from the United States. According to the Coase theorem, the problem is

Accepted Answer

A)  easy to solve because the United States and Canada are geographically close 
B)  easy to solve because the United States and Canada are allies 
C)  easy to solve because international property rights are recognized among capitalist countries 
D)  hard to solve because international negotiations are more costly than domestic ones 
E)  hard to solve because Canadians have property rights to clean, nonacidic rain 
A)  easy to solve because the United States and Canada are geographically close 
B)  easy to solve because the United States and Canada are allies 
C)  easy to solve because international property rights are recognized among capitalist countries 
D)  hard to solve because international negotiations are more costly than domestic ones 
E)  hard to solve because Canadians have property rights to clean, nonacidic rain

Question 20

An individual who drives a car without a muffler in an attempt to increase fuel economy is creating

Accepted Answer

A)  a positive externality 
B)  a public good 
C)  a negative externality 
D)  a winner's curse 
E)  vertical inequity 
A)  a positive externality 
B)  a public good 
C)  a negative externality 
D)  a winner's curse 
E)  vertical inequity

Exam 17: Externalities and the Environment

Most waste generated in the U.S. ends up in landfills because

The marginal social benefit curve for water quality slopes downward because

When consumption of a good or service produces benefits or costs that are not reflected in the market price for the good, this is known as a(n)

Exhibit 17-8 -Exhibit 17-8 represents the consumer market for higher education. If people base their education decisions on the marginal social benefit of education, what would be the social gain?

Open-access resources tend to be

Based on 2005 data what country is the worlds leading recycler?

Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal __________ is __________ __________ his personal marginal __________.

Which of the following could not have caused the increase in demand indicated in Exhibit 17-4?

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it, social welfare is

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

If production is characterized by variable technology, the optimal level of air quality occurs where

Exhibit 17-3 -In Exhibit 17-3, the optimal air quality level is where the MSB=MSC.

The band Coldplay's funding of 10,000 mango trees in India to help sop up emissions related to the release of their CD, A Rush of Blood to the Head, is an example of fixed-production technology.

The equilibrium price and quantity in a free market usually reflect private marginal costs and benefits, not social ones.

Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.

Exhibit 17-6 -In Exhibit 17-6, an unregulated market would produce

If consumption of education creates a positive externality, then in order to increase efficiency relative to the outcome determined by private decisions,

Fishing, the lumber industry, tourism, and even city buildings in Canada are harmed by acid rain, most of which comes from the United States. According to the Coase theorem, the problem is

An individual who drives a car without a muffler in an attempt to increase fuel economy is creating

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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Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal is his personal marginal .