Question 1

Policies that mandate the installation of specific pollution control devices are called

Accepted Answer

A) command and control policies. 
B) benefit policies. 
C) welfare policies. 
D) incentive policies. 
A) command and control policies. 
B) benefit policies. 
C) welfare policies. 
D) incentive policies.

Question 2

Figure 15-7  
-Refer to Figure 15-7.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve. 
A) the supply of pollution reduction curve. 
B) the demand for pollution reduction curve. 
C) the negative externality curve. 
D) the value of pollution reduction curve.

Question 3

Which of the following statements about the economically efficient level of air pollution is correct?

Accepted Answer

A) The economically efficient level of pollution is zero. 
B) The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C) The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D) The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised. 
A) The economically efficient level of pollution is zero. 
B) The economically efficient level of pollution occurs where all social costs equal all social benefits. 
C) The economically efficient level of pollution occurs where the marginal cost of pollution reduction equals the marginal social benefit of reduction. 
D) The economically efficient level of pollution occurs where total benefits of pollution reduction are maximised.

Question 4

Ronald Coase is famous for the Coase theorem,which is based on the premise that there is an economically efficient level of pollution reduction.Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulphur dioxide in an economically efficient manner.Why isn't this program an example of the Coase theorem?

Accepted Answer

The Coase theorem states that if transac

Question 5

Which of the following displays these two characteristics: rivalry and non-excludability?

Accepted Answer

A) a public good 
B) a private good 
C) a quasi-public good 
D) a common resource 
A) a public good 
B) a private good 
C) a quasi-public good 
D) a common resource

Question 6

All of the following are examples of public goods except

Accepted Answer

A) broadcast television with commercials. 
B) clean water systems. 
C) stock of knowledge in the public domain. 
D) crime prevention. 
A) broadcast television with commercials. 
B) clean water systems. 
C) stock of knowledge in the public domain. 
D) crime prevention.

Question 7

An external benefit is created when you pursue a university education.

Accepted Answer

A) True 
 B)False

Question 8

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

Accepted Answer

A) $2 per ton. 
B) $9 per ton. 
C) $21 per ton. 
D) $47 per ton. 
A) $2 per ton. 
B) $9 per ton. 
C) $21 per ton. 
D) $47 per ton.

Question 9

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A) it forces the polluting producer to internalise the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers. 
A) it forces the polluting producer to internalise the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers.

Question 10

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

Accepted Answer

A) tragic externalities. 
B) the tragedy of the commons. 
C) human greed. 
D) the consequences of not having a market economic system. 
A) tragic externalities. 
B) the tragedy of the commons. 
C) human greed. 
D) the consequences of not having a market economic system.

Question 11

What are property rights?

Accepted Answer

A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property,including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society 
A) the title to ownership of any physical asset 
B) a legal document verifying ownership of intangible assets 
C) the rights individuals or firms have to the exclusive use of their property,including the right to buy or sell it 
D) the right of the government to appropriate private assets for the good of society

Question 12

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain,then,according to the Coase theorem,

Accepted Answer

A) an efficient solution can be reached only if property rights are assigned to the victims of the pollution. 
B) an efficient solution can be reached only if property rights are assigned to the polluters. 
C) an efficient solution can be reached regardless of the initial assignment of property rights. 
D) government intervention is critical to reach an efficient solution. 
A) an efficient solution can be reached only if property rights are assigned to the victims of the pollution. 
B) an efficient solution can be reached only if property rights are assigned to the polluters. 
C) an efficient solution can be reached regardless of the initial assignment of property rights. 
D) government intervention is critical to reach an efficient solution.

Question 13

What is a market failure?

Accepted Answer

A) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C) It refers to a situation where an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event. 
D) It refers to a breakdown in a market economy because of widespread corruption in government. 
A) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C) It refers to a situation where an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event. 
D) It refers to a breakdown in a market economy because of widespread corruption in government.

Question 14

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

Accepted Answer

A) True 
 B)False

Question 15

Figure 15-9   Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15-9 illustrates the situation in the toilet paper market.
-Refer to Figure 15-9.The efficient output is

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Question 16

Figure 15-3  
-Refer to Figure 15-3.The deadweight loss due to the externality is represented by the area

Accepted Answer

A) mso. 
B) msn. 
C) nso. 
D) mtn. 
A) mso. 
B) msn. 
C) nso. 
D) mtn.

Question 17

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Accepted Answer

A) A.C.Pigou 
B) Adam Smith 
C) Ronald Coase 
D) John Maynard Keynes 
A) A.C.Pigou 
B) Adam Smith 
C) Ronald Coase 
D) John Maynard Keynes

Question 18

Which of the following describes how a positive externality affects a competitive market?

Accepted Answer

A) The externality causes a difference between the private benefit from consumption and the social benefit. 
B) The externality causes a difference between the private benefit from production and the social cost of production. 
C) The externality causes quantity demanded to exceed quantity supplied. 
D) The externality causes a difference between the social cost of production and the social cost of consumption. 
A) The externality causes a difference between the private benefit from consumption and the social benefit. 
B) The externality causes a difference between the private benefit from production and the social cost of production. 
C) The externality causes quantity demanded to exceed quantity supplied. 
D) The externality causes a difference between the social cost of production and the social cost of consumption.

Question 19

A free market fails when

Accepted Answer

A) there is government intervention. 
B) there is an external effect in either production,consumption,or both. 
C) firms that produce goods which create positive externalities go bankrupt. 
D) firms that produce goods which create negative externalities earn high profits. 
A) there is government intervention. 
B) there is an external effect in either production,consumption,or both. 
C) firms that produce goods which create positive externalities go bankrupt. 
D) firms that produce goods which create negative externalities earn high profits.

Question 20

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

Accepted Answer

A) further reductions will make society better off. 
B) further reduction will make society worse off. 
C) pollution taxes should be imposed on producers to pay for further reductions. 
D) economic efficiency will be increased if further reductions are made. 
A) further reductions will make society better off. 
B) further reduction will make society worse off. 
C) pollution taxes should be imposed on producers to pay for further reductions. 
D) economic efficiency will be increased if further reductions are made.

Policies that mandate the installation of specific pollution control devices are called

Figure 15-7 -Refer to Figure 15-7.The marginal cost of reducing pollution curve is the same curve as

Which of the following statements about the economically efficient level of air pollution is correct?

Which of the following displays these two characteristics: rivalry and non-excludability?

All of the following are examples of public goods except

An external benefit is created when you pursue a university education.

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

An advantage of imposing a tax on the producer that generates pollution is that

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

What are property rights?

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain,then,according to the Coase theorem,

What is a market failure?

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

Figure 15-9 Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15-9 illustrates the situation in the toilet paper market. -Refer to Figure 15-9.The efficient output is

Figure 15-3 -Refer to Figure 15-3.The deadweight loss due to the externality is represented by the area

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Which of the following describes how a positive externality affects a competitive market?

A free market fails when

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

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Exam 15: Externalities, Environmental Policy and Public Goods

Policies that mandate the installation of specific pollution control devices are called

Figure 15-7 -Refer to Figure 15-7.The marginal cost of reducing pollution curve is the same curve as

Which of the following statements about the economically efficient level of air pollution is correct?

Which of the following displays these two characteristics: rivalry and non-excludability?

All of the following are examples of public goods except

An external benefit is created when you pursue a university education.

Economists working at federal government agencies have estimated that the marginal social cost of carbon is about

An advantage of imposing a tax on the producer that generates pollution is that

Haiti was once a heavily forested country.Today,80 per cent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has led to devastating floods when it rains heavily.This is an example of

What are property rights?

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain,then,according to the Coase theorem,

What is a market failure?

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

Figure 15-9 Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15-9 illustrates the situation in the toilet paper market. -Refer to Figure 15-9.The efficient output is

Figure 15-3 -Refer to Figure 15-3.The deadweight loss due to the externality is represented by the area

According to ________,in a market with an externality,private parties would voluntarily negotiate an efficient outcome without government intervention.

Which of the following describes how a positive externality affects a competitive market?

A free market fails when

If the marginal benefit of reducing emissions of some air pollutant is less than the marginal cost,

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

The Distribution of Income and Social Policy

Filters