Question 1

In order to increase society's well-being, education might be

Accepted Answer

A) taxed to discourage production 
B) subsidized to encourage production 
C) taxed to encourage production 
D) subsidized to discourage production 
E) provided without government intervention 
A) taxed to discourage production 
B) subsidized to encourage production 
C) taxed to encourage production 
D) subsidized to discourage production 
E) provided without government intervention

Question 2

In order to increase society's total welfare, a production process that produces a negative externality should be

Accepted Answer

A) taxed 
B) provided by the government 
C) ignored 
D) subsidized 
E) exported 
A) taxed 
B) provided by the government 
C) ignored 
D) subsidized 
E) exported

Question 3

Oil is an example of a renewable resource.

Accepted Answer

A) True 
 B)False

Question 4

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 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

Most of the Superfund has been spent on

Accepted Answer

A) education of the public on environmental issues 
B) research 
C) court costs and legal fees 
D) cleanup and rehabilitation of polluted areas 
E) development and installation of antipollution devices 
A) education of the public on environmental issues 
B) research 
C) court costs and legal fees 
D) cleanup and rehabilitation of polluted areas 
E) development and installation of antipollution devices

Question 7

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 8

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 9

Exhibit 17-8   Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions only on the marginal private 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 10

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Accepted Answer

A) True 
 B)False

Question 11

By current U.S.law, anyone generating, storing, or transporting hazardous waste must pay to clean it up if it leaks or is otherwise discharged into the environment.This law has been in effect

Accepted Answer

A) since World War II 
B) since 1960 
C) since 1970 
D) since 1980 
E) only since 1990 
A) since World War II 
B) since 1960 
C) since 1970 
D) since 1980 
E) only since 1990

Question 12

According to Coase,

Accepted Answer

A) government regulation will almost always be necessary to eliminate negative externalities 
B) externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C) when bargaining costs are high, it is necessary to assign property rights 
D) assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E) there really is no externality problem with renewable resources 
A) government regulation will almost always be necessary to eliminate negative externalities 
B) externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C) when bargaining costs are high, it is necessary to assign property rights 
D) assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E) there really is no externality problem with renewable resources

Question 13

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 14

Dumping raw sewage into Boston Harbor is an example of

Accepted Answer

A) a negative externality 
B) a positive externality 
C) a private cost 
D) a sunk cost 
E) an inverse cost 
A) a negative externality 
B) a positive externality 
C) a private cost 
D) a sunk cost 
E) an inverse cost

Question 15

Most of the EPA Superfund expenditures have gone for court costs and legal fees.

Accepted Answer

A) True 
 B)False

Question 16

Mountain bikers and rollerbladers share the only trail in a city park.The city allows everyone 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.What is the property rights problem?

Accepted Answer

A) Rollerbladers do not have mountain bikes. 
B) Bikers do not have rollerblades. 
C) No one owns both bikes and blades. 
D) No one has property rights to the use of the trail. 
E) No one owns the park. 
A) Rollerbladers do not have mountain bikes. 
B) Bikers do not have rollerblades. 
C) No one owns both bikes and blades. 
D) No one has property rights to the use of the trail. 
E) No one owns the park.

Question 17

Suppose that the city builds a new park that is advertised as being "open to the public, " and within two months the grass in the park is ruined by overuse.This would be an example of

Accepted Answer

A) a nonrenewable resource 
B) a private good 
C) the common pool problem 
D) a positive externality 
E) a renewable and excludable resource 
A) a nonrenewable resource 
B) a private good 
C) the common pool problem 
D) a positive externality 
E) a renewable and excludable resource

Question 18

Markets fail when externalities are present

Accepted Answer

A) because all of the costs and benefits of producing a good are reflected in the market price 
B) because some of the costs and benefits of producing a good are not reflected in the market price 
C) only if they are negative; positive externalities are not market failures 
D) because profits are not maximized 
E) if the positive externalities are less than the negative externalities 
A) because all of the costs and benefits of producing a good are reflected in the market price 
B) because some of the costs and benefits of producing a good are not reflected in the market price 
C) only if they are negative; positive externalities are not market failures 
D) because profits are not maximized 
E) if the positive externalities are less than the negative externalities

Question 19

The optimal level of air quality

Accepted Answer

A) is always zero 
B) occurs when the marginal social cost of air quality exceeds the marginal social benefit 
C) is greater if the marginal social benefit curve of air quality shifts rightward 
D) occurs when positive externalities are eliminated 
E) eliminates the common pool problem 
A) is always zero 
B) occurs when the marginal social cost of air quality exceeds the marginal social benefit 
C) is greater if the marginal social benefit curve of air quality shifts rightward 
D) occurs when positive externalities are eliminated 
E) eliminates the common pool problem

Question 20

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

Exam 17: Externalities and the Environment

In order to increase society's well-being, education might be

In order to increase society's total welfare, a production process that produces a negative externality should be

Oil is an example of a renewable resource.

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.

The price of a pollution right is

Most of the Superfund has been spent on

Marginal social cost is equal to

Which of the following provides a positive externality?

Exhibit 17-8 Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions only on the marginal private benefit of education, how many years of education will they get?

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

By current U.S.law, anyone generating, storing, or transporting hazardous waste must pay to clean it up if it leaks or is otherwise discharged into the environment.This law has been in effect

According to Coase,

Dumping raw sewage into Boston Harbor is an example of

Most of the EPA Superfund expenditures have gone for court costs and legal fees.

Suppose that the city builds a new park that is advertised as being "open to the public, " and within two months the grass in the park is ruined by overuse.This would be an example of

Markets fail when externalities are present

The optimal level of air quality

The optimal level of pollution is

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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