Question 1

Explain why environmentally minded firms in a competitive industry will find it difficult to take environmental action.

Accepted Answer

Firms can survive in competition only if

Question 2

Direct controls are considered inefficient because all firms are forced to pay the same costs.

Accepted Answer

A) True 
 B)False

Question 3

Americans are creating an enormous amount of solid waste daily-over 4 pounds per person per day.How is the United States coping with this extraordinary problem?

Accepted Answer

Fortunately,recycling rates are rising t

Question 4

The pricing system has a failure built into it when externalities exist.

Accepted Answer

A) True 
 B)False

Question 5

Taxes on emissions have led to

Accepted Answer

A) extraction of pollutants by firms from their liquid discharges. 
B) recycling of pollutants in lieu of discharge as waste. 
C) voluntary reduction in emissions to avoid the taxes. 
D) all of the above. 
A) extraction of pollutants by firms from their liquid discharges. 
B) recycling of pollutants in lieu of discharge as waste. 
C) voluntary reduction in emissions to avoid the taxes. 
D) all of the above.

Question 6

The use of pollution charges to reduce pollution confronts the problem of

Accepted Answer

A) free riders who avoid revealing benefits from abatement. 
B) determining specific individual damages and appropriate charges associated with pollutants. 
C) necessarily lowering the price of the products. 
D) requiring no agency to administer the tax. 
A) free riders who avoid revealing benefits from abatement. 
B) determining specific individual damages and appropriate charges associated with pollutants. 
C) necessarily lowering the price of the products. 
D) requiring no agency to administer the tax.

Question 7

What is true of depletable resources is that

Accepted Answer

A) increasing scarcity leads to their total disappearance. 
B) they are depleted by gradually using up the supply of homogeneous resources, every unit of which is equally available. 
C) generally the most accessible and cheapest sources are used up so that new supplies become more costly. 
D) their prices must rise at the average rate of inflation. 
A) increasing scarcity leads to their total disappearance. 
B) they are depleted by gradually using up the supply of homogeneous resources, every unit of which is equally available. 
C) generally the most accessible and cheapest sources are used up so that new supplies become more costly. 
D) their prices must rise at the average rate of inflation.

Question 8

If the prices of natural resources begin to rise,as economists might expect,what will happen to the level of economic rent in this industry?

Accepted Answer

Economic rent will increase.The resource

Question 9

Cleaning an environment may lead to

Accepted Answer

A) less production. 
B) higher prices. 
C) lower incomes. 
D) all of the above. 
A) less production. 
B) higher prices. 
C) lower incomes. 
D) all of the above.

Question 10

Economic theory would lead us to suspect that deep sea oil reserves would be accessed before those located in the Middle East or on the U.S.mainland.

Accepted Answer

A) True 
 B)False

Question 11

In contrast to the need for legal enforcement under a system of direct controls,a taxes approach

Accepted Answer

A) is subject to greater uncertainty of payment of fees. 
B) makes taxes automatic and certain. 
C) speeds the prosecution and conviction process. 
D) does not actually reduce pollution, merely the cost of monitoring it. 
A) is subject to greater uncertainty of payment of fees. 
B) makes taxes automatic and certain. 
C) speeds the prosecution and conviction process. 
D) does not actually reduce pollution, merely the cost of monitoring it.

Question 12

The government prefers a market-based approach to reduce firms' emissions of a toxic gas but wants to make certain that no more than 1,000 cubic yards of the gas are ever emitted in a single day.The most efficient policy under these circumstances is likely to be a system of

Accepted Answer

A) per-unit taxes on emissions of the gas. 
B) per-unit taxes on the goods produced by firms that emit the gas. 
C) subsidies to firms that agree not to emit the gas. 
D) sales of permits to emit specified quantities of the gas on specified days. 
A) per-unit taxes on emissions of the gas. 
B) per-unit taxes on the goods produced by firms that emit the gas. 
C) subsidies to firms that agree not to emit the gas. 
D) sales of permits to emit specified quantities of the gas on specified days.

Question 13

Economic theory predicts that the price of a depletable resource will rise as it becomes more scarce.

Accepted Answer

A) True 
 B)False

Question 14

Direct controls are generally much more costly than emissions taxes because

Accepted Answer

A) under direct controls emissions cutbacks are usually not apportioned among the firms on the basis of their ability to reduce pollution cheaply and efficiently. 
B) emissions tax per unit of output is higher than the per-unit direct control program cost. 
C) government cannot legally levy emissions taxes that are as high. 
D) firms disregard emissions taxes. 
A) under direct controls emissions cutbacks are usually not apportioned among the firms on the basis of their ability to reduce pollution cheaply and efficiently. 
B) emissions tax per unit of output is higher than the per-unit direct control program cost. 
C) government cannot legally levy emissions taxes that are as high. 
D) firms disregard emissions taxes.

Question 15

Direct controls often require long legal proceedings before they can be effective.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following environmental approaches is most appropriate when surveillance and enforcement is impractical?

Accepted Answer

A) direct controls 
B) emissions tax 
C) volunteerism 
D) tradable emission permits 
A) direct controls 
B) emissions tax 
C) volunteerism 
D) tradable emission permits

Question 17

The cause of the "greenhouse effect" is the

Accepted Answer

A) increasing use of glass in construction. 
B) growth of desertification. 
C) burning of "fossil fuels." 
D) decline in carbon dioxide in the atmosphere. 
A) increasing use of glass in construction. 
B) growth of desertification. 
C) burning of "fossil fuels." 
D) decline in carbon dioxide in the atmosphere.

Question 18

Statistical studies suggest that the cost of direct controls for any target level of pollution is

Accepted Answer

A) much higher than the cost of taxes on emissions. 
B) about the same as the cost of taxes on emissions. 
C) lower than the cost of taxes on emissions. 
D) impossible to compare to the cost of taxes on emissions. 
A) much higher than the cost of taxes on emissions. 
B) about the same as the cost of taxes on emissions. 
C) lower than the cost of taxes on emissions. 
D) impossible to compare to the cost of taxes on emissions.

Question 19

In a free market the quantity demanded will not exceed the quantity supplied of a resource,even if it is undergoing rapid depletion.

Accepted Answer

A) True 
 B)False

Question 20

If a depletable resource is selling in a perfectly competitive market,its price will rise by greater and greater dollar amounts each year.

Accepted Answer

A) True 
 B)False

Exam 17: Externalities, the Environment, and Natural Resources

Explain why environmentally minded firms in a competitive industry will find it difficult to take environmental action.

Direct controls are considered inefficient because all firms are forced to pay the same costs.

Americans are creating an enormous amount of solid waste daily-over 4 pounds per person per day.How is the United States coping with this extraordinary problem?

The pricing system has a failure built into it when externalities exist.

Taxes on emissions have led to

The use of pollution charges to reduce pollution confronts the problem of

What is true of depletable resources is that

If the prices of natural resources begin to rise,as economists might expect,what will happen to the level of economic rent in this industry?

Cleaning an environment may lead to

Economic theory would lead us to suspect that deep sea oil reserves would be accessed before those located in the Middle East or on the U.S.mainland.

In contrast to the need for legal enforcement under a system of direct controls,a taxes approach

The government prefers a market-based approach to reduce firms' emissions of a toxic gas but wants to make certain that no more than 1,000 cubic yards of the gas are ever emitted in a single day.The most efficient policy under these circumstances is likely to be a system of

Economic theory predicts that the price of a depletable resource will rise as it becomes more scarce.

Direct controls are generally much more costly than emissions taxes because

Direct controls often require long legal proceedings before they can be effective.

Which of the following environmental approaches is most appropriate when surveillance and enforcement is impractical?

The cause of the "greenhouse effect" is the

Statistical studies suggest that the cost of direct controls for any target level of pollution is

In a free market the quantity demanded will not exceed the quantity supplied of a resource,even if it is undergoing rapid depletion.

If a depletable resource is selling in a perfectly competitive market,its price will rise by greater and greater dollar amounts each year.

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 Markets Prime Achievement: Innovation and Growth

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Filters