Question 1

The optimal level of water and air quality

Accepted Answer

A) is zero, which is a pollution-free environment 
B) occurs when the marginal private cost of air quality equals its marginal social cost 
C) is greater if the marginal social cost curve of air quality shifts downward 
D) occurs when all negative externalities are eliminated 
E) eliminates the common pool problem 
A) is zero, which is a pollution-free environment 
B) occurs when the marginal private cost of air quality equals its marginal social cost 
C) is greater if the marginal social cost curve of air quality shifts downward 
D) occurs when all negative externalities are eliminated 
E) eliminates the common pool problem

Question 2

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 3

The optimal level of air quality will increase if

Accepted Answer

A) the cost of polluting increases 
B) pollution is found to be self-absorbing 
C) a new process allows pollution to be removed more cheaply 
D) the marginal social cost of air quality increases 
E) the marginal social benefit of air quality decreases 
A) the cost of polluting increases 
B) pollution is found to be self-absorbing 
C) a new process allows pollution to be removed more cheaply 
D) the marginal social cost of air quality increases 
E) the marginal social benefit of air quality decreases

Question 4

Exhibit 17-1   In Exhibit 17-1, the amount by which the total social cost of producing the private equilibrium level of output exceeds the total social benefit is

Accepted Answer

A) $300 
B) $50 
C) $5, 000 
D) $1, 600 
E) $8, 000 
A) $300 
B) $50 
C) $5, 000 
D) $1, 600 
E) $8, 000

Question 5

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 6

The Coase theorem says that, if the appropriate property right is assigned to __________, an efficient solution to an externality problem will be achieved.

Accepted Answer

A) the party causing the externality 
B) the victim of the externality 
C) the party that can avoid the externality at the higher cost 
D) the party that can avoid the externality at the lower cost 
E) either one of the parties involved 
A) the party causing the externality 
B) the victim of the externality 
C) the party that can avoid the externality at the higher cost 
D) the party that can avoid the externality at the lower cost 
E) either one of the parties involved

Question 7

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 8

If a private market determines the quantity of smallpox vaccinations, which of the following is true?

Accepted Answer

A) The equilibrium quantity is too low for efficiency. 
B) The equilibrium price and quantity are too high for efficiency. 
C) The equilibrium price is efficient. 
D) The equilibrium quantity is too high for efficiency. 
E) The equilibrium price and quantity are efficient. 
A) The equilibrium quantity is too low for efficiency. 
B) The equilibrium price and quantity are too high for efficiency. 
C) The equilibrium price is efficient. 
D) The equilibrium quantity is too high for efficiency. 
E) The equilibrium price and quantity are efficient.

Question 9

When a citizens' group opposes expansion of the prison located in town, the basis of the opposition is that the larger prison will produce

Accepted Answer

A) a negative externality for the community 
B) a positive externality for the community 
C) more jobs in the community 
D) tax revenue for the community 
E) improved criminal justice options 
A) a negative externality for the community 
B) a positive externality for the community 
C) more jobs in the community 
D) tax revenue for the community 
E) improved criminal justice options

Question 10

In Japan most garbage is

Accepted Answer

A) either recycled or burned 
B) recycled 
C) burned 
D) deposited in landfills 
E) used for fuel 
A) either recycled or burned 
B) recycled 
C) burned 
D) deposited in landfills 
E) used for fuel

Question 11

Some U.S.cities still dump raw sewage directly into rivers or oceans.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of an open-access resource?

Accepted Answer

A) a city subway system 
B) a college education 
C) an elementary school education 
D) whales in the ocean 
E) pandas in the zoo 
A) a city subway system 
B) a college education 
C) an elementary school education 
D) whales in the ocean 
E) pandas in the zoo

Question 13

Exhibit 17-5   In Exhibit 17-5, if the government does not charge firms for emitting pollutants into a river,

Accepted Answer

A) firms will emit Q1 units of pollutant at a price of P0 each 
B) firms will emit Q2 units of pollutant at a price of P0 each 
C) firms will emit Q0 units of pollutant at a price of P3 each 
D) firms will emit Q1 units of pollutant at a price of P1 each 
E) firms will emit Q2 units of pollutant at a price of P3 each 
A) firms will emit Q1 units of pollutant at a price of P0 each 
B) firms will emit Q2 units of pollutant at a price of P0 each 
C) firms will emit Q0 units of pollutant at a price of P3 each 
D) firms will emit Q1 units of pollutant at a price of P1 each 
E) firms will emit Q2 units of pollutant at a price of P3 each

Question 14

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,

Accepted Answer

A) the club should be soundproofed so both businesses can stay open 
B) the club should be soundproofed because it is the one generating the externality 
C) the club should move rather than be soundproofed because eliminating an externality is better than compensating for it 
D) the class should move because it can eliminate the externality at a lower cost than can the nightclub 
E) whichever business has been there longer has the overriding property right; the other should adjust 
A) the club should be soundproofed so both businesses can stay open 
B) the club should be soundproofed because it is the one generating the externality 
C) the club should move rather than be soundproofed because eliminating an externality is better than compensating for it 
D) the class should move because it can eliminate the externality at a lower cost than can the nightclub 
E) whichever business has been there longer has the overriding property right; the other should adjust

Question 15

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 16

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 17

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of

Accepted Answer

A) positive externalities as long as bargaining costs are small 
B) negative externalities as long as bargaining costs are small 
C) negative externalities as long as bargaining costs are great 
D) any type of market failure 
E) any type of market failure that involves high transaction costs 
A) positive externalities as long as bargaining costs are small 
B) negative externalities as long as bargaining costs are small 
C) negative externalities as long as bargaining costs are great 
D) any type of market failure 
E) any type of market failure that involves high transaction costs

Question 18

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 19

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, how many years of education will they get?

Accepted Answer

A) 3 years 
B) 4 years 
C) 5 years 
D) 6 years 
E) 7 years 
A) 3 years 
B) 4 years 
C) 5 years 
D) 6 years 
E) 7 years

Question 20

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

Exam 17: Externalities and the Environment

The optimal level of water and air quality

Economists view pollution as an economic problem that arises because

The optimal level of air quality will increase if

Exhibit 17-1 In Exhibit 17-1, the amount by which the total social cost of producing the private equilibrium level of output exceeds the total social benefit is

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

The Coase theorem says that, if the appropriate property right is assigned to __________, an efficient solution to an externality problem will be achieved.

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

If a private market determines the quantity of smallpox vaccinations, which of the following is true?

When a citizens' group opposes expansion of the prison located in town, the basis of the opposition is that the larger prison will produce

In Japan most garbage is

Some U.S.cities still dump raw sewage directly into rivers or oceans.

Which of the following is an example of an open-access resource?

Exhibit 17-5 In Exhibit 17-5, if the government does not charge firms for emitting pollutants into a river,

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

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

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of

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?

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, how many years of education will they get?

Which of the following can be a renewable resource?

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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