Question 1

Wastes impose costs upon the community if they are

Accepted Answer

A)  solid. 
B)  liquid. 
C)  gaseous. 
D)  any of the above. 
A)  solid. 
B)  liquid. 
C)  gaseous. 
D)  any of the above.

Question 2

Why do most economists favor emissions taxes over direct controls as a pollution deterrent?

Accepted Answer

Direct controls require monitoring and e

Question 3

The worst and most difficult to extract resources are used first.

Accepted Answer

A) True 
 B)False

Question 4

Externalities can create a threat to environmental quality.

Accepted Answer

A) True 
 B)False

Question 5

Taxing pollution will encourage firms to reduce pollutants dumped in the atmosphere or in streams.

Accepted Answer

A) True 
 B)False

Question 6

The concept of the "best" level of pollution suggests that

Accepted Answer

A)  economists can't integrate externalities into supply and demand models. 
B)  the "public interest" prefers less pollution to more. 
C)  opportunity costs of reducing pollution may sometimes exceed the benefits. 
D)  markets efficiently reduce pollution to efficient levels. 
A)  economists can't integrate externalities into supply and demand models. 
B)  the "public interest" prefers less pollution to more. 
C)  opportunity costs of reducing pollution may sometimes exceed the benefits. 
D)  markets efficiently reduce pollution to efficient levels.

Question 7

There is concern that CFCs, a chemical by-product of refrigeration, are destroying Earth's protective ozone layer, leaving us more vulnerable to cataracts and skin cancer.Suppose each air conditioner creates 10 pounds of CFCs.The demand and supply of air conditioners follow:
 $\begin{array}{llllll}
 \underline{\text { Price (dollars) }} &   \underline{ 400 } &  \underline{ 350 }& \underline{ 300 } &  \underline{ 250 }&  \underline{ 200 } \
\text { Quantity demanded } & 10 & 12 & 14 & 16 & 18 \
\text { Ouantity supplied } & 18 & 16 & 14 & 12 & 10
\end{array}$ 
What will be the free market price and quantity, and what will be the price and quantity if the government forces suppliers to pay a $100 tax for each air conditioner produced?

Accepted Answer

The free market equilibrium occurs at Q

Question 8

Although pollution is caused by a failure of the market, many economists believe that the best way to protect the environment is to utilize the price mechanism.

Accepted Answer

A) True 
 B)False

Question 9

If a resource is in fact becoming scarcer, then one should expect

Accepted Answer

A)  the price of the resource to rise. 
B)  less demand for the resource as people try to conserve. 
C)  greater supply as people reduce inventories before it is all gone. 
D)  all of the above. 
A)  the price of the resource to rise. 
B)  less demand for the resource as people try to conserve. 
C)  greater supply as people reduce inventories before it is all gone. 
D)  all of the above.

Question 10

A "backstop resource" is a close substitute for a depletable resource that is available in almost unlimited supply but at a higher cost.Shale oil is a backstop resource for crude oil.Which of the following statements is correct?

Accepted Answer

A)  The production of shale oil is likely to increase over time even if crude oil is still available. 
B)  Shale oil is unlikely to be produced until all the crude oil has been depleted. 
C)  The existence of shale oil as a backstop resource will discourage firms from seeking new reserves of crude oil. 
D)  In the future, shale oil is likely to be produced at the same time as crude oil and to sell for a lower price. 
A)  The production of shale oil is likely to increase over time even if crude oil is still available. 
B)  Shale oil is unlikely to be produced until all the crude oil has been depleted. 
C)  The existence of shale oil as a backstop resource will discourage firms from seeking new reserves of crude oil. 
D)  In the future, shale oil is likely to be produced at the same time as crude oil and to sell for a lower price.

Question 11

Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer.

Accepted Answer

An appropriate diagram should resemble F

Question 12

____ has(have) traditionally been the chief instrument of environmental policy in the United States.

Accepted Answer

A)  Taxes on pollution 
B)  Voluntary compliance 
C)  Tradable emissions permits 
D)  Direct controls 
A)  Taxes on pollution 
B)  Voluntary compliance 
C)  Tradable emissions permits 
D)  Direct controls

Question 13

Define the following terms and explain their importance to the study of economics.
a.greenhouse gases
b.externality
c.emissions permits
d.known reserves

Accepted Answer

a.Greenhouse gases are buildups of carbo

Question 14

Rising prices of resources leads to inefficient resource use by industry.

Accepted Answer

A) True 
 B)False

Question 15

The British economist A.C.Pigou

Accepted Answer

A)  wrote The Economics of Welfare in 1911. 
B)  offered an explanation of the market economy's poor environmental performance. 
C)  outlined an approach to environmental policy still in favor with economists today. 
D)  All of the above are correct. 
A)  wrote The Economics of Welfare in 1911. 
B)  offered an explanation of the market economy's poor environmental performance. 
C)  outlined an approach to environmental policy still in favor with economists today. 
D)  All of the above are correct.

Question 16

Serious environmental problems are

Accepted Answer

A)  unique to industrial economies. 
B)  unique to Western economies. 
C)  unique to civilized economies (i.e., those in which people live mainly in cities). 
D)  None of the above is correct. 
A)  unique to industrial economies. 
B)  unique to Western economies. 
C)  unique to civilized economies (i.e., those in which people live mainly in cities). 
D)  None of the above is correct.

Question 17

As a resource becomes more scarce, we expect its price to

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain constant. 
D)  fluctuate wildly. 
A)  rise. 
B)  fall. 
C)  remain constant. 
D)  fluctuate wildly.

Question 18

According to economic theory, under perfect competition, the price of a depletable resource whose costs of transportation and extraction are negligible

Accepted Answer

A)  is a poor indicator of scarcity. 
B)  must rise at the rate of interest. 
C)  will be unable to change to avert running out of it. 
D)  is too erratic to allow markets to respond to shortages. 
A)  is a poor indicator of scarcity. 
B)  must rise at the rate of interest. 
C)  will be unable to change to avert running out of it. 
D)  is too erratic to allow markets to respond to shortages.

Question 19

In practice, taxes on emissions of pollutants have been found to

Accepted Answer

A)  be ineffective in encouraging firms to pollute less. 
B)  significantly reduce pollution by taxed firms. 
C)  be less reliable in reducing pollution than direct controls on pollution. 
D)  cause failures of the pricing system. 
A)  be ineffective in encouraging firms to pollute less. 
B)  significantly reduce pollution by taxed firms. 
C)  be less reliable in reducing pollution than direct controls on pollution. 
D)  cause failures of the pricing system.

Question 20

The external costs of cigarettes are related to the health problem smoking produces for both smokers and nonsmokers.One estimate places these costs at 29 cents per pack.Presently, sales and excise taxes on cigarettes average about 37 cents per pack.These estimates suggest that (i) cigarette consumption is below the optimal or efficient quantity; (ii) cigarette taxes should be reduced.

Accepted Answer

A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii 
A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii

Exam 17: Externalities, the Environment, and Natural Resources

Wastes impose costs upon the community if they are

Why do most economists favor emissions taxes over direct controls as a pollution deterrent?

The worst and most difficult to extract resources are used first.

Externalities can create a threat to environmental quality.

Taxing pollution will encourage firms to reduce pollutants dumped in the atmosphere or in streams.

The concept of the "best" level of pollution suggests that

Although pollution is caused by a failure of the market, many economists believe that the best way to protect the environment is to utilize the price mechanism.

If a resource is in fact becoming scarcer, then one should expect

A "backstop resource" is a close substitute for a depletable resource that is available in almost unlimited supply but at a higher cost.Shale oil is a backstop resource for crude oil.Which of the following statements is correct?

Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer.

____ has(have) traditionally been the chief instrument of environmental policy in the United States.

Define the following terms and explain their importance to the study of economics. a.greenhouse gases b.externality c.emissions permits d.known reserves

Rising prices of resources leads to inefficient resource use by industry.

The British economist A.C.Pigou

Serious environmental problems are

As a resource becomes more scarce, we expect its price to

According to economic theory, under perfect competition, the price of a depletable resource whose costs of transportation and extraction are negligible

In practice, taxes on emissions of pollutants have been found to

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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