Question 1

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity.

Accepted Answer

A) True 
 B)False

Question 2

Unpriced by-products of production or consumption that provide benefits to other consumers or other firms are known as

Accepted Answer

A) negative externalities 
B) common pool benefits 
C) positive externalities 
D) private benefits 
E) Coase by-products 
A) negative externalities 
B) common pool benefits 
C) positive externalities 
D) private benefits 
E) Coase by-products

Question 3

Government restrictions on the use of an open-access resource

Accepted Answer

A) may improve efficiency 
B) will decrease efficiency 
C) are unnecessary 
D) contribute to pollution of the resource 
E) contribute to depletion of the resource 
A) may improve efficiency 
B) will decrease efficiency 
C) are unnecessary 
D) contribute to pollution of the resource 
E) contribute to depletion of the resource

Question 4

At the market output and price for a good whose production causes pollution,

Accepted Answer

A) pollution is eliminated 
B) the marginal social cost of production exceeds the marginal social benefit of production 
C) the private cost of production equals the private benefit of production 
D) the marginal social benefit of production equals the marginal social cost of production 
E) too little of the good is produced 
A) pollution is eliminated 
B) the marginal social cost of production exceeds the marginal social benefit of production 
C) the private cost of production equals the private benefit of production 
D) the marginal social benefit of production equals the marginal social cost of production 
E) too little of the good is produced

Question 5

Marginal external cost equals marginal private cost minus marginal social cost.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a positive externality of consumption?

Accepted Answer

A) inoculations against a disease reduce the likelihood of transmitting it to others 
B) phosphates from laundry detergents 
C) litter from fast-food containers 
D) ozone depletion from the production of fast-food containers 
E) the greenhouse effect 
A) inoculations against a disease reduce the likelihood of transmitting it to others 
B) phosphates from laundry detergents 
C) litter from fast-food containers 
D) ozone depletion from the production of fast-food containers 
E) the greenhouse effect

Question 7

Puerta Vallarta International Airport is near the coast.At night planes take off and land from the west, over the water.During the day planes approach and leave from the east, over Puerta Vallarta neighborhoods.Night flights into and out of Puerta Vallarta are more dangerous than day flights.Which rights are in conflict in this situation?

Accepted Answer

A) residents' right to enjoy the ocean and their right to peace and quiet 
B) residents' right to enjoy the ocean and air passengers' right to enjoy the ocean 
C) residents' right to peace and quiet and air passengers' right to safety 
D) residents' right to peace and quiet and safety 
E) air passengers' right to safety and convenience 
A) residents' right to enjoy the ocean and their right to peace and quiet 
B) residents' right to enjoy the ocean and air passengers' right to enjoy the ocean 
C) residents' right to peace and quiet and air passengers' right to safety 
D) residents' right to peace and quiet and safety 
E) air passengers' right to safety and convenience

Question 8

Environmental problems result when social costs and benefits are different from private costs and benefits.

Accepted Answer

A) True 
 B)False

Question 9

When an activity results in the imposition of external costs, markets will produce more than the socially optimal level of that activity.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

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

Question 12

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

Question 13

The Superfund for toxic waste was established for all of the following reasons except one.Which is the exception.

Accepted Answer

A) sites get a lot of media attention 
B) Superfund sites are more hazardous than other sources of pollution, e.g., fertilizer residues 
C) the costs of cleanup are concentrated 
D) political pressure 
E) none of the above 
A) sites get a lot of media attention 
B) Superfund sites are more hazardous than other sources of pollution, e.g., fertilizer residues 
C) the costs of cleanup are concentrated 
D) political pressure 
E) none of the above

Question 14

Fish are

Accepted Answer

A) always renewable resources 
B) renewable resources whenever property rights are well defined 
C) renewable resources if they are taken and replaced at rates that provide a steady supply 
D) renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E) renewable resources whenever property rights are well defined and can be easily enforced 
A) always renewable resources 
B) renewable resources whenever property rights are well defined 
C) renewable resources if they are taken and replaced at rates that provide a steady supply 
D) renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E) renewable resources whenever property rights are well defined and can be easily enforced

Question 15

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 16

The United States recycles a greater portion of its garbage than Japan does.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 17-4   In Exhibit 17-4, the shift of the demand curve from D to D' indicates that

Accepted Answer

A) producers want to discharge more pollution into the river 
B) producers want to use more of the river in a nonpolluting way 
C) consumers want producers to clean up the polluted river 
D) consumers want to buy goods that use technology that does not pollute 
E) consumers want to buy the river from the polluter 
A) producers want to discharge more pollution into the river 
B) producers want to use more of the river in a nonpolluting way 
C) consumers want producers to clean up the polluted river 
D) consumers want to buy goods that use technology that does not pollute 
E) consumers want to buy the river from the polluter

Question 18

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 19

Unpriced by-products of production or consumption that impose costs on other consumers or firms are known as

Accepted Answer

A) negative externalities 
B) effluent fees 
C) pollution rights 
D) positive externalities 
E) moral hazards 
A) negative externalities 
B) effluent fees 
C) pollution rights 
D) positive externalities 
E) moral hazards

Question 20

If firms pollute when they produce,

Accepted Answer

A) marginal social cost equals marginal private cost 
B) marginal private cost exceeds marginal social cost 
C) marginal social cost exceeds marginal private cost 
D) marginal social cost equals marginal external cost 
E) marginal social cost equals marginal private cost, which equals marginal external cost 
A) marginal social cost equals marginal private cost 
B) marginal private cost exceeds marginal social cost 
C) marginal social cost exceeds marginal private cost 
D) marginal social cost equals marginal external cost 
E) marginal social cost equals marginal private cost, which equals marginal external cost

Exam 17: Externalities and the Environment

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity.

Unpriced by-products of production or consumption that provide benefits to other consumers or other firms are known as

Government restrictions on the use of an open-access resource

At the market output and price for a good whose production causes pollution,

Marginal external cost equals marginal private cost minus marginal social cost.

Which of the following is a positive externality of consumption?

Environmental problems result when social costs and benefits are different from private costs and benefits.

When an activity results in the imposition of external costs, markets will produce more than the socially optimal level of that activity.

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

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

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

The Superfund for toxic waste was established for all of the following reasons except one.Which is the exception.

Fish are

The marginal social benefit curve for water quality slopes downward because

The United States recycles a greater portion of its garbage than Japan does.

Exhibit 17-4 In Exhibit 17-4, the shift of the demand curve from D to D' indicates that

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?

Unpriced by-products of production or consumption that impose costs on other consumers or firms are known as

If firms pollute when they produce,

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

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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