Question 1

Environmental pollution can be characterized as a market failure that distorts the classical market outcome.

Accepted Answer

A) True 
 B)False  True

Question 2

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2QD and p2 = 250 - 0.5QD, then the market demand function would be P = 350 - 0.7QD.

Accepted Answer

A) True 
 B)False  True

Question 3

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the price at the efficient equilibrium is

Accepted Answer

A)  PE = $18 
B)  PE = $22.50 
C)  PE = $20 
D)  PE = $40 
A)  PE = $18 
B)  PE = $22.50 
C)  PE = $20 
D)  PE = $40 B

Question 4

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the firm's M$\pi$ function must be

Accepted Answer

A)  M$\pi$ = 20 - 0.8Q 
B)  PE = $22.50 
C)  M$\pi$ = 0.3Q 
D)  M$\pi$ = 20 - 0.1Q 
A)  M$\pi$ = 20 - 0.8Q 
B)  PE = $22.50 
C)  M$\pi$ = 0.3Q 
D)  M$\pi$ = 20 - 0.1Q

Question 5

If property rights are held by the producer of an externality-generating good, then bargaining will continue as long as MEC > ρ > Mπ, where ρ represents the payment offered to the producer not to pollute.

Accepted Answer

A) True 
 B)False

Question 6

If we define the relevant market as "environmental quality," then the market failure is due to the presence of a negative externality.

Accepted Answer

A) True 
 B)False

Question 7

An external effect that generates costs to a third party is called

Accepted Answer

A)  free-ridership 
B)  a positive externality 
C)  a negative externality 
D)  a marginal private cost 
A)  free-ridership 
B)  a positive externality 
C)  a negative externality 
D)  a marginal private cost

Question 8

The reduction in damages to the environment from changing output from QC to QE is

Accepted Answer

A)  EH 
B)  DG 
C)  DEHG 
D)  DGH 
A)  EH 
B)  DG 
C)  DEHG 
D)  DGH

Question 9

Use the following graph of the refined petroleum market to answer the questions below.
  
-Which area represents the net gain to society? Should the reduction in output from QC to QE take place? Why or why not?

Accepted Answer

Area D represents the net gain to societ

Question 10

Property rights are the set of valid claims to a good or resource that allow its use and the transfer of ownership through a sale.

Accepted Answer

A) True 
 B)False

Question 11

The underlying assumptions of the Coase Theorem are that transactions are costless and that damages are accessible and can be measured.

Accepted Answer

A) True 
 B)False

Question 12

The original 'long box' packaging of CD's is an example of

Accepted Answer

A)  a positive production externality 
B)  a negative production externality 
C)  an envirotech industry 
D)  a negative consumption externality 
A)  a positive production externality 
B)  a negative production externality 
C)  an envirotech industry 
D)  a negative consumption externality

Question 13

At QC, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is

Accepted Answer

A)  DG 
B)  DEH 
C)  EH 
D)  none of the above 
A)  DG 
B)  DEH 
C)  EH 
D)  none of the above

Question 14

If a good has the characteristic of nonrivalness, it means that

Accepted Answer

A)  the good is publicly provided 
B)  it is impossible to prevent others from sharing the benefits of consumption 
C)  the benefits linked to consumption are indivisible 
D)  none of the above 
A)  the good is publicly provided 
B)  it is impossible to prevent others from sharing the benefits of consumption 
C)  the benefits linked to consumption are indivisible 
D)  none of the above

Question 15

The study conducted by Greenpeace China of the Pearl River Delta (PRD) region indicates that progress is being made to improve water quality.

Accepted Answer

A) True 
 B)False

Question 16

According to the Coase Theorem, assignment of property rights will permit bargaining that leads to an efficient solution only in the absence of externalities.

Accepted Answer

A) True 
 B)False

Question 17

According to the Coase Theorem

Accepted Answer

A)  efficiency can result only if producers hold the property rights 
B)  an efficient outcome is possible as long as property rights are assigned 
C)  efficiency is not possible in the presence of an environmental externality 
D)  none of the above 
A)  efficiency can result only if producers hold the property rights 
B)  an efficient outcome is possible as long as property rights are assigned 
C)  efficiency is not possible in the presence of an environmental externality 
D)  none of the above

Question 18

Nonexcludability refers to the possibility that the benefits of consumption can be shared.

Accepted Answer

A) True 
 B)False

Question 19

The Coase Theorem assumes

Accepted Answer

A)  transactions are costless 
B)  damages are accessible and measureable 
C)  both (a) and (b) 
D)  none of the above 
A)  transactions are costless 
B)  damages are accessible and measureable 
C)  both (a) and (b) 
D)  none of the above

Question 20

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the competitive price level is

Accepted Answer

A)  PC = $18 
B)  PC = $20 
C)  PC = $25 
D)  PC = $40 
A)  PC = $18 
B)  PC = $20 
C)  PC = $25 
D)  PC = $40

Exam 3: Modeling Market Failure

Environmental pollution can be characterized as a market failure that distorts the classical market outcome.

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2QD and p2 = 250 - 0.5QD, then the market demand function would be P = 350 - 0.7QD.

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the price at the efficient equilibrium is

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the firm's M π\piπ function must be

If property rights are held by the producer of an externality-generating good, then bargaining will continue as long as MEC > ρ > Mπ, where ρ represents the payment offered to the producer not to pollute.

If we define the relevant market as "environmental quality," then the market failure is due to the presence of a negative externality.

An external effect that generates costs to a third party is called

The reduction in damages to the environment from changing output from QC to QE is

Use the following graph of the refined petroleum market to answer the questions below. -Which area represents the net gain to society? Should the reduction in output from QC to QE take place? Why or why not?

Property rights are the set of valid claims to a good or resource that allow its use and the transfer of ownership through a sale.

The underlying assumptions of the Coase Theorem are that transactions are costless and that damages are accessible and can be measured.

The original 'long box' packaging of CD's is an example of

At QC, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is

If a good has the characteristic of nonrivalness, it means that

The study conducted by Greenpeace China of the Pearl River Delta (PRD) region indicates that progress is being made to improve water quality.

According to the Coase Theorem, assignment of property rights will permit bargaining that leads to an efficient solution only in the absence of externalities.

According to the Coase Theorem

Nonexcludability refers to the possibility that the benefits of consumption can be shared.

The Coase Theorem assumes

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the competitive price level is

The Role of Economics in Environmental Management

Modeling the Market Process: a Review of the Basics

Conventional Solutions to Environmental Problems: Command-And-Control Approach

Economic Solutions to Environmental Problems: the Market Approach

Environmental Risk Analysis

Assessing Benefits for Environmental Decision Making

Assessing Costs for Environmental Decision Making

Benefit-Cost Analysis in Environmental Decision Making

Defining Air Quality: the Standard-Setting Process

Improving Air Quality: Controlling Mobile Sources

Improving Air Quality: Controlling Stationary Sources

Global Air Quality: Policies for Ozone Depletion and Climate Change

Defining Water Quality: the Standard-Setting Process

Improving Water Quality: Controlling Point and Nonpoint Sources

Protecting Safe Drinking Water

Managing Hazardous Solid Waste and Waste Sites

Managing Municipal Solid Waste

Controlling Pesticides and Toxic Chemicals

Sustainable Development: International Environmental Agreements and International Trade

Sustainable Approaches: Industrial Ecology and Pollution Prevention

Filters

If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 - 0.2Q_D and p2 = 250 - 0.5Q_D, then the market demand function would be P = 350 - 0.7Q_D.

Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q; MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions. -Based on the model, the firm's M $\pi$ function must be

The reduction in damages to the environment from changing output from Q_C to Q_E is

Use the following graph of the refined petroleum market to answer the questions below. -Which area represents the net gain to society? Should the reduction in output from Q_C to Q_E take place? Why or why not?

At Q_C, the maximum payment recreational users of the river would be willing to pay the producer for a unit change in output is