Question 1

Which of the following is an example of a positive externality?​

Accepted Answer

A) Water pollution. 
B) John's roommate going on a diet​ 
C) Second-hand smoke​ 
D) A loud conversation in the workplace​ 
E) The emission of harmful gases by a factory​ 
A) Water pollution. 
B) John's roommate going on a diet​ 
C) Second-hand smoke​ 
D) A loud conversation in the workplace​ 
E) The emission of harmful gases by a factory​ B

Question 2

The government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?​

Accepted Answer

A) Pollution will be created by those least willing and able to pay the damages. 
B) Pollution will be created by those most willing and able to pay for the right to pollute. 
C) The funds collected by the government will be enough to compensate any individual harmed by the pollution. 
D) Pollution will increase from zero to 1,000 units per day. 
E) There will be no incentive for polluters to try to sneak emissions past government monitoring devices. 
A) Pollution will be created by those least willing and able to pay the damages. 
B) Pollution will be created by those most willing and able to pay for the right to pollute. 
C) The funds collected by the government will be enough to compensate any individual harmed by the pollution. 
D) Pollution will increase from zero to 1,000 units per day. 
E) There will be no incentive for polluters to try to sneak emissions past government monitoring devices. B

Question 3

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of:​

Accepted Answer

A) arbitrage as long as bargaining costs are small. 
B) negative externalities as long as bargaining costs are small. 
C) negative externalities as long as bargaining costs are high. 
D) moral hazard as long as bargaining costs are small. 
E) adverse selection as long as bargaining costs are small. 
A) arbitrage as long as bargaining costs are small. 
B) negative externalities as long as bargaining costs are small. 
C) negative externalities as long as bargaining costs are high. 
D) moral hazard as long as bargaining costs are small. 
E) adverse selection as long as bargaining costs are small. B

Question 4

The Clean Air Act of 1970 has:​

Accepted Answer

A) been ineffective at reducing lead emissions in automobiles. 
B) actually caused an increase in auto emissions. 
C) been fairly successful in reducing auto emissions, especially lead. 
D) been unsuccessful in reducing auto emissions, especially sulfur oxides. 
E) been ineffective at reducing carbon monoxide emissions. 
A) been ineffective at reducing lead emissions in automobiles. 
B) actually caused an increase in auto emissions. 
C) been fairly successful in reducing auto emissions, especially lead. 
D) been unsuccessful in reducing auto emissions, especially sulfur oxides. 
E) been ineffective at reducing carbon monoxide emissions.

Question 5

When consuming a good creates positive externalities, _____.​

Accepted Answer

A) the private demand for the good increases. 
B) the private demand for the good decreases. 
C) the private demand curve overstates the marginal social benefit of the good. 
D) the private demand curve understates the marginal social benefit of the good. 
E) the equilibrium quantity traded of the good increases without government intervention. 
A) the private demand for the good increases. 
B) the private demand for the good decreases. 
C) the private demand curve overstates the marginal social benefit of the good. 
D) the private demand curve understates the marginal social benefit of the good. 
E) the equilibrium quantity traded of the good increases without government intervention.

Question 6

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 7

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) bargaining costs must be high​ 
D) bargaining costs must be low​ 
E) property rights must be determined by the government​ 
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) bargaining costs must be high​ 
D) bargaining costs must be low​ 
E) property rights must be determined by the government​

Question 8

The optimal level of air pollution by a firm is:​

Accepted Answer

A) the level at which the marginal private cost of improving air quality equals zero. 
B) the level at which the marginal social cost of improving air quality equals the marginal social benefit. 
C) the level at which the average social cost of improving air quality equals the average social benefit. 
D) the level at which the total social cost of improving air quality equals the total social benefit. 
E) the level at which the marginal social cost of improving air quality is minimized. 
A) the level at which the marginal private cost of improving air quality equals zero. 
B) the level at which the marginal social cost of improving air quality equals the marginal social benefit. 
C) the level at which the average social cost of improving air quality equals the average social benefit. 
D) the level at which the total social cost of improving air quality equals the total social benefit. 
E) the level at which the marginal social cost of improving air quality is minimized.

Question 9

Economists view pollution as an economic problem that arises because:​

Accepted Answer

A) private enterprises always minimize the amount of pollution produced. 
B) profitable firms rarely pollute. 
C) the level of pollution declines as the economy grows. 
D) firms that pollute do not pay the full social cost of producing their output. 
E) pollution costs are borne by the consumer. 
A) private enterprises always minimize the amount of pollution produced. 
B) profitable firms rarely pollute. 
C) the level of pollution declines as the economy grows. 
D) firms that pollute do not pay the full social cost of producing their output. 
E) pollution costs are borne by the consumer.

Question 10

Nearly half of the Superfund has been spent on:​

Accepted Answer

A) education of the public on environmental issues. 
B) research. 
C) court costs and legal fees. 
D) cleaning rivers that have been polluted. 
E) the development and installation of antipollution devices. 
A) education of the public on environmental issues. 
B) research. 
C) court costs and legal fees. 
D) cleaning rivers that have been polluted. 
E) the development and installation of antipollution devices.

Question 11

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

Accepted Answer

A) private goods. 
B) goods that produce moral hazard. 
C) goods that produce positive externalities. 
D) goods that have close substitutes. 
E) goods that produce negative externalities. 
A) private goods. 
B) goods that produce moral hazard. 
C) goods that produce positive externalities. 
D) goods that have close substitutes. 
E) goods that produce negative externalities.

Question 12

Which of the following is not an example of an open-access resource?​

Accepted Answer

A) Deer in a forest 
B) Fish in the ocean​ 
C) Oil deposits​ 
D) Wild flowers​ 
E) Trees in a forest 
A) Deer in a forest 
B) Fish in the ocean​ 
C) Oil deposits​ 
D) Wild flowers​ 
E) Trees in a forest

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The Clean Air Act of 1970:​

Accepted Answer

A) set up a depletion tax system. 
B) reduced air pollution standards. 
C) recognized air as an economic resource. 
D) established a system of transferable pollution rights. 
E) forbade producers to emit any pollutants into the air. 
A) set up a depletion tax system. 
B) reduced air pollution standards. 
C) recognized air as an economic resource. 
D) established a system of transferable pollution rights. 
E) forbade producers to emit any pollutants into the air.

Question 15

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal, ______.​

Accepted Answer

A) pollution would not be affected 
B) the price of pollution rights would rise and the amount of pollution would decrease​ 
C) the price of pollution rights would fall and the amount of pollution would decrease​ 
D) the price of pollution rights would fall and the amount of pollution would increase​ 
E) the price of pollution rights would rise and the amount of pollution would increase​ 
A) pollution would not be affected 
B) the price of pollution rights would rise and the amount of pollution would decrease​ 
C) the price of pollution rights would fall and the amount of pollution would decrease​ 
D) the price of pollution rights would fall and the amount of pollution would increase​ 
E) the price of pollution rights would rise and the amount of pollution would increase​

Question 16

The following graph shows the demand, the supply, and the marginal social benefit curves. The graph shows market equilibrium in the presence of ______.​ ​
Figure 17.6
​

Accepted Answer

A) positive externalities 
B) positive and negative externalities 
C) negative externalities 
D) the Coase theorem 
E) asymmetric information 
A) positive externalities 
B) positive and negative externalities 
C) negative externalities 
D) the Coase theorem 
E) asymmetric information

Question 17

The following graph shows the market for pollution rights. The shift of the demand curve from D to D' indicates that ______.​ ​
Figure 17.4
​

Accepted Answer

A) producers want to discharge more pollution 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 pollution 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 18

In order to increase society's well-being, measles vaccinations should 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 19

Society's total cost of producing a good:​

Accepted Answer

A) includes only the private cost to a firm. 
B) includes only the external cost. 
C) includes all private and external costs. 
D) includes the sunk cost and the total variable cost of a firm. 
E) includes only the average variable cost of production. 
A) includes only the private cost to a firm. 
B) includes only the external cost. 
C) includes all private and external costs. 
D) includes the sunk cost and the total variable cost of a firm. 
E) includes only the average variable cost of production.

Question 20

Which of the following is a renewable resource?​

Accepted Answer

A) Oil 
B) Air​ 
C) Coal​ 
D) Iron ore​ 
E) Uranium​ 
A) Oil 
B) Air​ 
C) Coal​ 
D) Iron ore​ 
E) Uranium​

Exam 17: Externalities and the Environment

Which of the following is an example of a positive externality?​

The government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?​

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of:​

The Clean Air Act of 1970 has:​

When consuming a good creates positive externalities, _____.​

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

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

The optimal level of air pollution by a firm is:​

Economists view pollution as an economic problem that arises because:​

Nearly half of the Superfund has been spent on:​

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

Which of the following is not an example of an open-access resource?​

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

The Clean Air Act of 1970:​

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal, ______.​

The following graph shows the demand, the supply, and the marginal social benefit curves. The graph shows market equilibrium in the presence of ______.​ ​ Figure 17.6 ​

The following graph shows the market for pollution rights. The shift of the demand curve from D to D' indicates that ______.​ ​ Figure 17.4 ​

In order to increase society's well-being, measles vaccinations should be:​

Society's total cost of producing a good:​

Which of the following is a renewable resource?​

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Filters

Which of the following is an example of a positive externality?

The government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of:

The Clean Air Act of 1970 has:

When consuming a good creates positive externalities, _____.

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

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

The optimal level of air pollution by a firm is:

Economists view pollution as an economic problem that arises because:

Nearly half of the Superfund has been spent on:

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

Which of the following is not an example of an open-access resource?

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

The Clean Air Act of 1970:

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal, ______.

The following graph shows the demand, the supply, and the marginal social benefit curves. The graph shows market equilibrium in the presence of ______. Figure 17.6

The following graph shows the market for pollution rights. The shift of the demand curve from D to D' indicates that ______. Figure 17.4

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

Society's total cost of producing a good:

Which of the following is a renewable resource?