Question 1

Fish in the sea can be harvested until _____

Accepted Answer

A) the marginal benefit of catching more fish is less than the marginal cost. 
B) the marginal benefit of catching more fish is greater than the marginal cost. 
C) the marginal benefit of catching more fish becomes negative. 
D) the marginal benefit of catching more fish becomes infinity. 
E) the marginal benefit of catching more fish becomes zero. 
A) the marginal benefit of catching more fish is less than the marginal cost. 
B) the marginal benefit of catching more fish is greater than the marginal cost. 
C) the marginal benefit of catching more fish becomes negative. 
D) the marginal benefit of catching more fish becomes infinity. 
E) the marginal benefit of catching more fish becomes zero.

Question 2

Markets fail when externalities are present _____

Accepted Answer

A) because all the costs and benefits of producing goods are reflected in the market prices of the goods. 
B) because some of the costs and benefits of producing goods are not reflected in the market prices of the goods. 
C) because monopoly power arises. 
D) because profits are not maximized. 
E) because there is underprovision of merit goods. 
A) because all the costs and benefits of producing goods are reflected in the market prices of the goods. 
B) because some of the costs and benefits of producing goods are not reflected in the market prices of the goods. 
C) because monopoly power arises. 
D) because profits are not maximized. 
E) because there is underprovision of merit goods.

Question 3

Pollution occurs because property rights to exhaustible resources are well defined.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 17.4
  
-Refer to Exhibit 17.4,which shows market equilibrium in the presence of an externality.The optimal air quality level is 50.

Accepted Answer

A) True 
 B)False

Question 5

When the consumption of a good or service imposes costs to society that are not reflected in the market price of the good,_____

Accepted Answer

A) a negative externality arises. 
B) it implies that a renewable resource has been used in the production of the good. 
C) a positive externality arises. 
D) it implies that the good is a public good. 
E) it implies that a nonrenewable resource has been used in the production of the good. 
A) a negative externality arises. 
B) it implies that a renewable resource has been used in the production of the good. 
C) a positive externality arises. 
D) it implies that the good is a public good. 
E) it implies that a nonrenewable resource has been used in the production of the good.

Question 6

Unpriced byproducts of production or consumption that provide benefits to other consumers or other firms are known as _____

Accepted Answer

A) negative externalities. 
B) merit goods. 
C) positive externalities. 
D) private benefits. 
E) pure substitutes. 
A) negative externalities. 
B) merit goods. 
C) positive externalities. 
D) private benefits. 
E) pure substitutes.

Question 7

Output restrictions or taxes could force people to _____

Accepted Answer

A) use the resource at a rate that is not socially optimal. 
B) use the resource at a rate that supports a sustainable yield. 
C) be more competitive. 
D) overuse exhaustible resources. 
E) overuse renewable resources. 
A) use the resource at a rate that is not socially optimal. 
B) use the resource at a rate that supports a sustainable yield. 
C) be more competitive. 
D) overuse exhaustible resources. 
E) overuse renewable resources.

Question 8

Exhibit 17.6
  
-Refer to Exhibit 17.6,which shows the market for pollution rights.The shift of the demand curve from D to D' indicates that ______

Accepted Answer

A) producers want to discharge more pollutants into the river. 
B) producers want to use more of the river in a nonpolluting way. 
C) consumers want producers to clean up the polluted river. 
D) consumers want to buy goods that use technology that does not pollute. 
E) consumers want to buy technology that reduces pollution. 
A) producers want to discharge more pollutants into the river. 
B) producers want to use more of the river in a nonpolluting way. 
C) consumers want producers to clean up the polluted river. 
D) consumers want to buy goods that use technology that does not pollute. 
E) consumers want to buy technology that reduces pollution.

Question 9

Suppose the production of electricity generates pollution.In this case,the optimal level of electricity is produced when the marginal social benefit from electricity production equals the _____

Accepted Answer

A) marginal private cost of electricity production. 
B) marginal social cost of electricity production. 
C) marginal external cost of electricity production. 
D) marginal cost of labor used in electricity production. 
E) marginal cost of capital used in electricity production. 
A) marginal private cost of electricity production. 
B) marginal social cost of electricity production. 
C) marginal external cost of electricity production. 
D) marginal cost of labor used in electricity production. 
E) marginal cost of capital used in electricity production.

Question 10

Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.

Accepted Answer

A) True 
 B)False

Question 11

The Comprehensive Environmental Response,Compensation,and Liability Act of 1980 is also known as _____

Accepted Answer

A) the Superfund law. 
B) the Coase theorem. 
C) the Resource Conservation and Recovery Act. 
D) the Clean Water Act. 
E) the Clean Air Act. 
A) the Superfund law. 
B) the Coase theorem. 
C) the Resource Conservation and Recovery Act. 
D) the Clean Water Act. 
E) the Clean Air Act.

Question 12

Exhibit 17.6
  
-Refer to Exhibit 17.6,which shows the market for pollution rights.Which of the following could not have caused an increase in the demand for pollution rights?

Accepted Answer

A) an increase in the number of polluting firms 
B) an improvement in the ability of the river to absorb pollutants 
C) a decrease in the cost of pollution abatement equipment 
D) the ability of existing firms to sell pollution rights at a price lower than the market price. 
E) the subsidy provided by the government on the price of pollution rights 
A) an increase in the number of polluting firms 
B) an improvement in the ability of the river to absorb pollutants 
C) a decrease in the cost of pollution abatement equipment 
D) the ability of existing firms to sell pollution rights at a price lower than the market price. 
E) the subsidy provided by the government on the price of pollution rights

Question 13

The _____ coordinates Federal efforts to address the common-pool issues of air,water,and ground pollution in the United States.

Accepted Answer

A) Association for Protection of Environment 
B) Environmental Protection Agency 
C) U.S. Environment Conservation Agency 
D) U.S. Department of Environmental Protection 
E) U.S. Association for Prevention of Pollution 
A) Association for Protection of Environment 
B) Environmental Protection Agency 
C) U.S. Environment Conservation Agency 
D) U.S. Department of Environmental Protection 
E) U.S. Association for Prevention of Pollution

Question 14

Exhibit 17.3
  
-Refer to Exhibit 17.3,which shows market equilibrium in the presence of externality in an economy.The 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) less than $6 and more than 50 units, respectively. 
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) less than $6 and more than 50 units, respectively.

Question 15

How does recycling impose its own environmental cost?

Accepted Answer

A) Curbside recycling requires fleets of trucks that pollute the air. 
B) Consumers are more receptive to more efficient packaging. 
C) Labels identify the recycled content of the packaging. 
D) Some recycling is economical. 
E) 15 percent of garbage that is incinerated gets burned in trash-to-energy plants. 
A) Curbside recycling requires fleets of trucks that pollute the air. 
B) Consumers are more receptive to more efficient packaging. 
C) Labels identify the recycled content of the packaging. 
D) Some recycling is economical. 
E) 15 percent of garbage that is incinerated gets burned in trash-to-energy plants.

Question 16

Which U.S.city ranks among the world's worst in sulfur dioxide?

Accepted Answer

A) New York 
B) Chicago 
C) Los Angeles 
D) Houston 
E) no U.S. city 
A) New York 
B) Chicago 
C) Los Angeles 
D) Houston 
E) no U.S. city

Question 17

In markets with positive externalities,_____

Accepted Answer

A) the marginal social benefit from the good is less than the marginal social cost. 
B) the average social benefit is less than the average social cost. 
C) the property rights on the good have been well defined. 
D) private marginal benefits result in a quantity of the good that is less than socially optimal. 
E) private marginal benefits result in a quantity of the good that is more than socially optimal. 
A) the marginal social benefit from the good is less than the marginal social cost. 
B) the average social benefit is less than the average social cost. 
C) the property rights on the good have been well defined. 
D) private marginal benefits result in a quantity of the good that is less than socially optimal. 
E) private marginal benefits result in a quantity of the good that is more than socially optimal.

Question 18

Which of the following is true of open-access wildlife resources?

Accepted Answer

A) They are likely to be used efficiently. 
B) They are not likely to be used at all. 
C) It is unprofitable to use them. 
D) They are likely to be used but unlikely to generate profit. 
E) They are likely to be used until they become extinct. 
A) They are likely to be used efficiently. 
B) They are not likely to be used at all. 
C) It is unprofitable to use them. 
D) They are likely to be used but unlikely to generate profit. 
E) They are likely to be used until they become extinct.

Question 19

Exhibit 17.8
  
-Refer to Exhibit 17.8,which shows the demand,the supply,and the marginal social benefit curves.An unregulated market would produce ______

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 20

What poses as a potential threat of contamination for groundwater?

Accepted Answer

A) paper products 
B) fluorocarbon sprays 
C) automobile emissions 
D) underground storage tanks for oil and chemicals 
E) recycled plastic 
A) paper products 
B) fluorocarbon sprays 
C) automobile emissions 
D) underground storage tanks for oil and chemicals 
E) recycled plastic

Exam 17: Externalities and the Environment

Fish in the sea can be harvested until _____

Markets fail when externalities are present _____

Pollution occurs because property rights to exhaustible resources are well defined.

Exhibit 17.4 -Refer to Exhibit 17.4,which shows market equilibrium in the presence of an externality.The optimal air quality level is 50.

When the consumption of a good or service imposes costs to society that are not reflected in the market price of the good,_____

Unpriced byproducts of production or consumption that provide benefits to other consumers or other firms are known as _____

Output restrictions or taxes could force people to _____

Exhibit 17.6 -Refer to Exhibit 17.6,which shows the market for pollution rights.The shift of the demand curve from D to D' indicates that ______

Suppose the production of electricity generates pollution.In this case,the optimal level of electricity is produced when the marginal social benefit from electricity production equals the _____

Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.

The Comprehensive Environmental Response,Compensation,and Liability Act of 1980 is also known as _____

Exhibit 17.6 -Refer to Exhibit 17.6,which shows the market for pollution rights.Which of the following could not have caused an increase in the demand for pollution rights?

The _____ coordinates Federal efforts to address the common-pool issues of air,water,and ground pollution in the United States.

Exhibit 17.3 -Refer to Exhibit 17.3,which shows market equilibrium in the presence of externality in an economy.The equilibrium price and output (determined exclusively by private decisions)are _____

How does recycling impose its own environmental cost?

Which U.S.city ranks among the world's worst in sulfur dioxide?

In markets with positive externalities,_____

Which of the following is true of open-access wildlife resources?

Exhibit 17.8 -Refer to Exhibit 17.8,which shows the demand,the supply,and the marginal social benefit curves.An unregulated market would produce ______

What poses as a potential threat of contamination for groundwater?

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