Question 1

In the presence of a negative externality

Accepted Answer

A)  there is an overallocation of resources to production 
B)  the competitive equilibrium will not achieve an allocatively efficient solution 
C)  MSC exceeds MSB at the competitive output level 
D)  all of the above 
E)  (a) and (b) only 
A)  there is an overallocation of resources to production 
B)  the competitive equilibrium will not achieve an allocatively efficient solution 
C)  MSC exceeds MSB at the competitive output level 
D)  all of the above 
E)  (a) and (b) only

Question 2

According to the textbook application, CD packaging is a negative production externality.

Accepted Answer

A) True 
 B)False

Question 3

Theoretically, the market demand for a public good is found by

Accepted Answer

A)  vertically adding the MEC and MPC functions 
B)  overcoming free-ridership and vertically summing the price responses for each quantity 
C)  adding horizontally the marginal benefits received by each consumer at every price level 
D)  summing the quantities each person is willing and able to buy at each and every price 
A)  vertically adding the MEC and MPC functions 
B)  overcoming free-ridership and vertically summing the price responses for each quantity 
C)  adding horizontally the marginal benefits received by each consumer at every price level 
D)  summing the quantities each person is willing and able to buy at each and every price

Question 4

At an efficient equilibrium, MSB = MSC, which implies that Mπ = MEC.

Accepted Answer

A) True 
 B)False

Question 5

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.
-According to these relationships, the efficient output level arises where

Accepted Answer

A)  QE = 25 
B)  QE = 40 
C)  QE = 20 
D)  none of the above 
A)  QE = 25 
B)  QE = 40 
C)  QE = 20 
D)  none of the above

Question 6

Use the following graph of the refined petroleum market to answer the questions below.
  
-2 Which area represents the loss to the petroleum refineries as a result of the restoration of efficiency?

Accepted Answer

The loss to petroleum refiners

Question 7

If recreational users of a natural resource hold the property rights to that resource, their bargaining stance with the producer of an externality-generating good who wants to use that resource is that they will accept a payment ρ as long as ρ < (MSC - MSB).

Accepted Answer

A) True 
 B)False

Question 8

The market demand for a public good such as environmental quality is found as the horizontal sum of all the individual demands for that good.

Accepted Answer

A) True 
 B)False

Question 9

At a competitive equilibrium, Mπ = 0, but at an efficient equilibrium MEC = 0.

Accepted Answer

A) True 
 B)False

Question 10

If property rights for resources are shared, those resources are called common property resources.

Accepted Answer

A) True 
 B)False

Question 11

A public good is characterized as possessing either nonrivalry in consumption or nonexcludable benefits.

Accepted Answer

A) True 
 B)False

Question 12

The firm's marginal profit (M?) at the efficient equilibrium is

Accepted Answer

A)  EH 
B)  HL 
C)  GK 
D)  DG 
A)  EH 
B)  HL 
C)  GK 
D)  DG

Question 13

The loss of profit to the chemical solvent manufacturer from changing its output from QC to QE is

Accepted Answer

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

Question 14

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.
-According to these relationships, the competitive output level arises where

Accepted Answer

A)  QC = 25 
B)  QC = 20 
C)  QC = 40 
D)  none of the above 
A)  QC = 25 
B)  QC = 20 
C)  QC = 40 
D)  none of the above

Question 15

A public good

Accepted Answer

A)  possesses the characteristic of nonrivalry in consumption 
B)  is one whose benefits cannot be shared 
C)  is provided by the public sector 
D)  has nonexcludable benefits 
E)  both (a) and (d) 
A)  possesses the characteristic of nonrivalry in consumption 
B)  is one whose benefits cannot be shared 
C)  is provided by the public sector 
D)  has nonexcludable benefits 
E)  both (a) and (d)

Question 16

The net gain to society from changing output from QC to QE is

Accepted Answer

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

Question 17

Nonrivalness means that one person's consumption does not preclude that of another.

Accepted Answer

A) True 
 B)False

Question 18

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 MPC function is:

Accepted Answer

A)  MPC = 20 - 0.8Q 
B)  MPC = 30 - 0.6Q 
C)  MPC = 10 + 0.8Q 
D)  MPC = 10 + 0.2Q 
A)  MPC = 20 - 0.8Q 
B)  MPC = 30 - 0.6Q 
C)  MPC = 10 + 0.8Q 
D)  MPC = 10 + 0.2Q

Question 19

Use the following graph of the refined petroleum market to answer the questions below.
  
-Describe the bargaining process between the refineries and the recreational water users, assuming the refineries have the right to pollute.

Accepted Answer

4. If the refiners have the right to pol

Question 20

If the third-party effects of a good generate benefits to a third party, it is a positive externality.

Accepted Answer

A) True 
 B)False

Exam 3: Modeling Market Failure

In the presence of a negative externality

According to the textbook application, CD packaging is a negative production externality.

Theoretically, the market demand for a public good is found by

At an efficient equilibrium, MSB = MSC, which implies that Mπ = MEC.

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. -According to these relationships, the efficient output level arises where

Use the following graph of the refined petroleum market to answer the questions below. -2 Which area represents the loss to the petroleum refineries as a result of the restoration of efficiency?

If recreational users of a natural resource hold the property rights to that resource, their bargaining stance with the producer of an externality-generating good who wants to use that resource is that they will accept a payment ρ as long as ρ < (MSC - MSB).

The market demand for a public good such as environmental quality is found as the horizontal sum of all the individual demands for that good.

At a competitive equilibrium, Mπ = 0, but at an efficient equilibrium MEC = 0.

If property rights for resources are shared, those resources are called common property resources.

A public good is characterized as possessing either nonrivalry in consumption or nonexcludable benefits.

The firm's marginal profit (M?) at the efficient equilibrium is

The loss of profit to the chemical solvent manufacturer from changing its output from QC to QE 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. -According to these relationships, the competitive output level arises where

A public good

The net gain to society from changing output from QC to QE is

Nonrivalness means that one person's consumption does not preclude that of another.

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 MPC function is:

Use the following graph of the refined petroleum market to answer the questions below. -Describe the bargaining process between the refineries and the recreational water users, assuming the refineries have the right to pollute.

If the third-party effects of a good generate benefits to a third party, it is a positive externality.

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

The loss of profit to the chemical solvent manufacturer from changing its output from Q_C to Q_E is

The net gain to society from changing output from Q_C to Q_E is