Question 1

Establishing property rights to cattle on the Great Plains is possible because _____

Accepted Answer

A) long-run economic considerations outweigh short-run considerations. 
B) global economic considerations outweigh domestic considerations. 
C) private property rights can be enforced by using barbed wire to fence the range. 
D) the value of the jobs created by cattle ranching exceeds the cost to society. 
E) there are no property rights on the Great Plains. 
A) long-run economic considerations outweigh short-run considerations. 
B) global economic considerations outweigh domestic considerations. 
C) private property rights can be enforced by using barbed wire to fence the range. 
D) the value of the jobs created by cattle ranching exceeds the cost to society. 
E) there are no property rights on the Great Plains.

Question 2

A negative externality is likely to arise if _____

Accepted Answer

A) the government sets up more schools. 
B) a company introduces a research and development unit. 
C) factories install devices to reduce the amount of chemicals released. 
D) the government introduces a measles vaccine. 
E) car owners refuse to pay for devices that reduce the emission of carbon monoxide. 
A) the government sets up more schools. 
B) a company introduces a research and development unit. 
C) factories install devices to reduce the amount of chemicals released. 
D) the government introduces a measles vaccine. 
E) car owners refuse to pay for devices that reduce the emission of carbon monoxide.

Question 3

Exhibit 17.6
  
-Refer to Exhibit 17.6,which shows the market for pollution rights.An increase in demand indicates ______

Accepted Answer

A) a fall in pollution. 
B) reduced environmental damage. 
C) an increase in the price of the right to pollute. 
D) an increase in the benefit of cleaning up the pollution. 
E) an increase in the cost of cleaning up the river. 
A) a fall in pollution. 
B) reduced environmental damage. 
C) an increase in the price of the right to pollute. 
D) an increase in the benefit of cleaning up the pollution. 
E) an increase in the cost of cleaning up the river.

Question 4

The socially optimal level of output of a good that generates an externality occurs when _____

Accepted Answer

A) the marginal private cost of production equals marginal private revenue. 
B) the firm maximizes its profits. 
C) the marginal private cost of production exceeds the marginal social cost of production. 
D) the marginal social cost of production equals the marginal social benefit of production. 
E) the marginal private cost of the good equals the marginal social benefit of the good. 
A) the marginal private cost of production equals marginal private revenue. 
B) the firm maximizes its profits. 
C) the marginal private cost of production exceeds the marginal social cost of production. 
D) the marginal social cost of production equals the marginal social benefit of production. 
E) the marginal private cost of the good equals the marginal social benefit of the good.

Question 5

When the consumption of a good generates positive externalities,_____

Accepted Answer

A) the private demand curve for the good shifts rightward. 
B) the private demand curve for the good shifts leftward. 
C) the private demand curve for the good lies below the marginal social benefit curve. 
D) the private demand curve for the good lies above the marginal social benefit curve. 
E) the equilibrium quantity of the good determined by the free private market is too high. 
A) the private demand curve for the good shifts rightward. 
B) the private demand curve for the good shifts leftward. 
C) the private demand curve for the good lies below the marginal social benefit curve. 
D) the private demand curve for the good lies above the marginal social benefit curve. 
E) the equilibrium quantity of the good determined by the free private market is too high.

Question 6

To solve the common-pool problem in fishing,governments can _____

Accepted Answer

A) provide a subsidy. 
B) impose a tax. 
C) impose property rights. 
D) remove property rights. 
E) impound all fishing fleets. 
A) provide a subsidy. 
B) impose a tax. 
C) impose property rights. 
D) remove property rights. 
E) impound all fishing fleets.

Question 7

According to EPA estimates,compliance with pollution-control regulations cost U.S.producers and consumers _____ in 2015.

Accepted Answer

A) very little 
B) more than $300 billion 
C) more than $500 billion 
D) about $ 1 trillion 
E) nothing 
A) very little 
B) more than $300 billion 
C) more than $500 billion 
D) about $ 1 trillion 
E) nothing

Question 8

When using the economic efficiency approach to control air and water pollution,the government _____

Accepted Answer

A) forces each firm to produce emissions in the most cost-efficient manner irrespective of its cost structure. 
B) offers each firm the flexibility to reduce emissions in the most cost-effective manner, given its unique cost structure. 
C) offers each firm the option of choosing between the cost-minimizing emission level and the profit-maximizing emission level. 
D) provides each firm with fixed rules for reducing pollution. 
E) offers each firm the option of using either total cost pricing or average cost pricing when determining the optimum emission level. 
A) forces each firm to produce emissions in the most cost-efficient manner irrespective of its cost structure. 
B) offers each firm the flexibility to reduce emissions in the most cost-effective manner, given its unique cost structure. 
C) offers each firm the option of choosing between the cost-minimizing emission level and the profit-maximizing emission level. 
D) provides each firm with fixed rules for reducing pollution. 
E) offers each firm the option of using either total cost pricing or average cost pricing when determining the optimum emission level.

Question 9

Exhibit 17.8
  
-Refer to Exhibit 17.8,which shows the demand,the supply,and the marginal social benefit curves.The socially efficient level of output is _______

Accepted Answer

A) 0 units. 
B) 10 units. 
C) 20 units. 
D) 40 units. 
E) 50 units. 
A) 0 units. 
B) 10 units. 
C) 20 units. 
D) 40 units. 
E) 50 units.

Question 10

Which of the following is an example of an activity that generates positive externalities?

Accepted Answer

A) driving a car that emits high amounts of carbon monoxide 
B) dumping wastes into a river 
C) littering streets 
D) initiating a program to encourage education 
E) smoking in a public place 
A) driving a car that emits high amounts of carbon monoxide 
B) dumping wastes into a river 
C) littering streets 
D) initiating a program to encourage education 
E) smoking in a public place

Question 11

Exhibit 17.5
  
-Refer to Exhibit 17.5,which shows greenhouse gas emissions for a given rate of electricity production.The social welfare loss that results at A' is shown by area _____

Accepted Answer

A) edcb. 
B) eade. 
C) abc. 
D) acd. 
E) abe. 
A) edcb. 
B) eade. 
C) abc. 
D) acd. 
E) abe.

Question 12

The optimal level of air pollution by a firm is _____

Accepted Answer

A) the level at which the marginal private cost of improving air quality equals zero. 
B) the level at which the marginal social cost of improving air quality equals the marginal social benefit. 
C) the level at which the average social cost of improving air quality equals the average social benefit. 
D) the level at which the total social cost of improving air quality equals the total social benefit. 
E) the level at which the marginal social cost of improving air quality is minimized. 
A) the level at which the marginal private cost of improving air quality equals zero. 
B) the level at which the marginal social cost of improving air quality equals the marginal social benefit. 
C) the level at which the average social cost of improving air quality equals the average social benefit. 
D) the level at which the total social cost of improving air quality equals the total social benefit. 
E) the level at which the marginal social cost of improving air quality is minimized.

Question 13

Coase argued that the free market should be able to solve an externality problem without assigning property rights.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an exhaustible resource?

Accepted Answer

A) coal 
B) oil 
C) air 
D) iron ore 
E) uranium 
A) coal 
B) oil 
C) air 
D) iron ore 
E) uranium

Question 15

Which of the following provides a positive externality?

Accepted Answer

A) smog 
B) inoculating children against measles 
C) smoking in public places 
D) littering roads 
E) listening to loud music 
A) smog 
B) inoculating children against measles 
C) smoking in public places 
D) littering roads 
E) listening to loud music

Question 16

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 17

Exhibit 17.2
  
-Refer to Exhibit 17.2,which shows equilibrium in a market in the presence of an externality.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) $3,000. 
B) $1,000. 
C) $5,000. 
D) $1,600. 
E) $1,400. 
A) $3,000. 
B) $1,000. 
C) $5,000. 
D) $1,600. 
E) $1,400.

Question 18

According to the Coase theorem,_____ in order to solve a negative externality problem efficiently.

Accepted Answer

A) the property right must be assigned to the party with the highest-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) bargaining costs must be high 
D) bargaining costs must be low 
E) property rights must be determined by the government 
A) the property right must be assigned to the party with the highest-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) bargaining costs must be high 
D) bargaining costs must be low 
E) property rights must be determined by the government

Question 19

If the marginal social benefit of consuming a product exceeds the marginal social cost,social welfare _____

Accepted Answer

A) increases when output decreases. 
B) decreases when output increases. 
C) remains unchanged when output increases. 
D) increases when output increases. 
E) is at its maximum. 
A) increases when output decreases. 
B) decreases when output increases. 
C) remains unchanged when output increases. 
D) increases when output increases. 
E) is at its maximum.

Question 20

_____ resources,if used conservatively,can be used indefinitely over time.

Accepted Answer

A) Open-access 
B) Renewable 
C) Cyclical 
D) Recyclable 
E) Exhaustible 
A) Open-access 
B) Renewable 
C) Cyclical 
D) Recyclable 
E) Exhaustible

Exam 17: Externalities and the Environment

Establishing property rights to cattle on the Great Plains is possible because _____

A negative externality is likely to arise if _____

Exhibit 17.6 -Refer to Exhibit 17.6,which shows the market for pollution rights.An increase in demand indicates ______

The socially optimal level of output of a good that generates an externality occurs when _____

When the consumption of a good generates positive externalities,_____

To solve the common-pool problem in fishing,governments can _____

According to EPA estimates,compliance with pollution-control regulations cost U.S.producers and consumers _____ in 2015.

When using the economic efficiency approach to control air and water pollution,the government _____

Exhibit 17.8 -Refer to Exhibit 17.8,which shows the demand,the supply,and the marginal social benefit curves.The socially efficient level of output is _______

Which of the following is an example of an activity that generates positive externalities?

Exhibit 17.5 -Refer to Exhibit 17.5,which shows greenhouse gas emissions for a given rate of electricity production.The social welfare loss that results at A' is shown by area _____

The optimal level of air pollution by a firm is _____

Coase argued that the free market should be able to solve an externality problem without assigning property rights.

Which of the following is not an exhaustible resource?

Which of the following provides a positive externality?

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.

Exhibit 17.2 -Refer to Exhibit 17.2,which shows equilibrium in a market in the presence of an externality.The amount by which the total social cost of producing the private equilibrium level of output exceeds the total social benefit is _____

According to the Coase theorem,_____ in order to solve a negative externality problem efficiently.

If the marginal social benefit of consuming a product exceeds the marginal social cost,social welfare _____

_____ resources,if used conservatively,can be used indefinitely over time.

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