Question 1

When a resource is an open-access resource,

Accepted Answer

A)  each individual in the society owns it 
B)  the group owns it 
C)  no one owns it 
D)  the government owns it 
E)  some nonprofit agency owns it 
A)  each individual in the society owns it 
B)  the group owns it 
C)  no one owns it 
D)  the government owns it 
E)  some nonprofit agency owns it

Question 2

In the village of Axiok,the grassland is an open-access resource.To avoid the common-pool problem,the government can do all of the following except:

Accepted Answer

A)  Do nothing because this is a privately-owned resource 
B)  Restrict the number of cattle allowed to graze 
C)  Charge all the cattle owners a fee for use of the grassland 
D)  Impose a tax on the cattle owners 
E)  Restrict the number of cattle each farmer is allowed to have 
A)  Do nothing because this is a privately-owned resource 
B)  Restrict the number of cattle allowed to graze 
C)  Charge all the cattle owners a fee for use of the grassland 
D)  Impose a tax on the cattle owners 
E)  Restrict the number of cattle each farmer is allowed to have

Question 3

Marginal external cost equals marginal private cost minus marginal social cost.

Accepted Answer

A) True 
 B)False

Question 4

When a system of pollution rights is in effect,polluters have no economic incentive to reduce the amount of pollution they generate.

Accepted Answer

A) True 
 B)False

Question 5

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it,social welfare is

Accepted Answer

A)  increased by reducing output 
B)  decreased by expanding output 
C)  unchanged by expanding or reducing output 
D)  increased by expanding output 
E)  maximized 
A)  increased by reducing output 
B)  decreased by expanding output 
C)  unchanged by expanding or reducing output 
D)  increased by expanding output 
E)  maximized

Question 6

When consumption of a good creates positive externalities,

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

A metal-stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to nap.It would cost the factory $5 million to move;it would cost $1 million for the day care center to move.Sound insulation for the factory costs $1 million;insulation for the day care center costs $200,000.The court initially determines that the day care center has the property right and orders the factory to purchase insulation for the day care.But on appeal the factory is awarded the property right.How would the optimal solution to this problem change after the appeals court decision?

Accepted Answer

A)  The insulation would still be bought,but it would be bought by the day care center,a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center,a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought,but it would be bought by the factory,a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center,a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation,a result consistent with the Coase theorem. 
A)  The insulation would still be bought,but it would be bought by the day care center,a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center,a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought,but it would be bought by the factory,a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center,a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation,a result consistent with the Coase theorem.

Question 10

In order to increase society's well-being,measles vaccinations might be

Accepted Answer

A)  taxed to discourage production 
B)  subsidized to encourage production 
C)  taxed to encourage production 
D)  subsidized to discourage production 
E)  provided without government intervention 
A)  taxed to discourage production 
B)  subsidized to encourage production 
C)  taxed to encourage production 
D)  subsidized to discourage production 
E)  provided without government intervention

Question 11

To enhance social welfare,the government should encourage the production of

Accepted Answer

A)  all goods 
B)  no goods 
C)  goods that provide positive externalities 
D)  goods whose social cost exceeds their private cost 
E)  goods that provide negative externalities 
A)  all goods 
B)  no goods 
C)  goods that provide positive externalities 
D)  goods whose social cost exceeds their private cost 
E)  goods that provide negative externalities

Question 12

Some U.S.cities still dump raw sewage directly into rivers or oceans.

Accepted Answer

A) True 
 B)False

Question 13

According to Coase,

Accepted Answer

A)  government regulation will almost always be necessary to eliminate negative externalities 
B)  externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C)  when bargaining costs are high,it is necessary to assign property rights 
D)  assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E)  there really is no externality problem with renewable resources 
A)  government regulation will almost always be necessary to eliminate negative externalities 
B)  externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C)  when bargaining costs are high,it is necessary to assign property rights 
D)  assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E)  there really is no externality problem with renewable resources

Question 14

As more pollution is abated,the marginal social benefit from further abatement diminishes.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 17-4
  
-In Exhibit 17-4,as demand increases,

Accepted Answer

A)  pollution increases 
B)  the economic damage done by pollution increases 
C)  the pollution level is the same,but the price of the right to pollute increases 
D)  the pollution level is the same,but the benefit of cleaning up the pollution increases 
E)  the cost of cleaning up the rivers increases 
A)  pollution increases 
B)  the economic damage done by pollution increases 
C)  the pollution level is the same,but the price of the right to pollute increases 
D)  the pollution level is the same,but the benefit of cleaning up the pollution increases 
E)  the cost of cleaning up the rivers increases

Question 16

The marginal social cost curve is downward sloping under variable technology.

Accepted Answer

A) True 
 B)False

Question 17

Fish are

Accepted Answer

A)  always renewable resources 
B)  renewable resources whenever property rights are well defined 
C)  renewable resources if they are taken and replaced at rates that provide a steady supply 
D)  renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E)  renewable resources whenever property rights are well defined and can be easily enforced 
A)  always renewable resources 
B)  renewable resources whenever property rights are well defined 
C)  renewable resources if they are taken and replaced at rates that provide a steady supply 
D)  renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E)  renewable resources whenever property rights are well defined and can be easily enforced

Question 18

Property rights can be defined and enforced

Accepted Answer

A)  only by the government 
B)  only by ethical norms 
C)  by the government and by ethical norms 
D)  only through constant renegotiation 
E)  by government,by informal social actions,and by ethical norms 
A)  only by the government 
B)  only by ethical norms 
C)  by the government and by ethical norms 
D)  only through constant renegotiation 
E)  by government,by informal social actions,and by ethical norms

Question 19

Which of the following responses to a positive externality enhances society's welfare?

Accepted Answer

A)  taxes 
B)  subsidies 
C)  effluent fees 
D)  quotas 
E)  a cut in funding 
A)  taxes 
B)  subsidies 
C)  effluent fees 
D)  quotas 
E)  a cut in funding

Question 20

All of the following are examples of negative externalities except one.Which is the exception?

Accepted Answer

A)  water pollution 
B)  your roommate going on a diet 
C)  second-hand smoke 
D)  loud conversation in the workplace 
E)  your neighbor building a bomb shelter on her front lawn 
A)  water pollution 
B)  your roommate going on a diet 
C)  second-hand smoke 
D)  loud conversation in the workplace 
E)  your neighbor building a bomb shelter on her front lawn

When a resource is an open-access resource,

In the village of Axiok,the grassland is an open-access resource.To avoid the common-pool problem,the government can do all of the following except:

Marginal external cost equals marginal private cost minus marginal social cost.

When a system of pollution rights is in effect,polluters have no economic incentive to reduce the amount of pollution they generate.

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it,social welfare is

When consumption of a good creates positive externalities,

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

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

In order to increase society's well-being,measles vaccinations might be

To enhance social welfare,the government should encourage the production of

Some U.S.cities still dump raw sewage directly into rivers or oceans.

According to Coase,

As more pollution is abated,the marginal social benefit from further abatement diminishes.

Exhibit 17-4 -In Exhibit 17-4,as demand increases,

The marginal social cost curve is downward sloping under variable technology.

Fish are

Property rights can be defined and enforced

Which of the following responses to a positive externality enhances society's welfare?

All of the following are examples of negative externalities except one.Which is the exception?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Amonopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, and Corporate Finance

Transaction Costs, imperfect Information, and Market Behavior

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Income Distribution and Poverty

International Trade

International Finance

Developing and Transitional Economies

Filters

Exam 17: Externalities and the Environment

When a resource is an open-access resource,

In the village of Axiok,the grassland is an open-access resource.To avoid the common-pool problem,the government can do all of the following except:

Marginal external cost equals marginal private cost minus marginal social cost.

When a system of pollution rights is in effect,polluters have no economic incentive to reduce the amount of pollution they generate.

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it,social welfare is

When consumption of a good creates positive externalities,

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

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

In order to increase society's well-being,measles vaccinations might be

To enhance social welfare,the government should encourage the production of

Some U.S.cities still dump raw sewage directly into rivers or oceans.

According to Coase,

As more pollution is abated,the marginal social benefit from further abatement diminishes.

Exhibit 17-4 -In Exhibit 17-4,as demand increases,

The marginal social cost curve is downward sloping under variable technology.

Fish are

Property rights can be defined and enforced

Which of the following responses to a positive externality enhances society's welfare?

All of the following are examples of negative externalities except one.Which is the exception?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Amonopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, and Corporate Finance

Transaction Costs, imperfect Information, and Market Behavior

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Income Distribution and Poverty

International Trade

International Finance

Developing and Transitional Economies

Filters