Question 1

Exhibit 17-9  
-In Exhibit 17-9,the optimal water quality level is

Accepted Answer

A) 4 
B) 5 
C) 6 
D) 7 
E) 8 
A) 4 
B) 5 
C) 6 
D) 7 
E) 8

Question 2

How much of U.S.garbage is disposed of in landfills?

Accepted Answer

A) 25 percent 
B) 40 percent 
C) 60 percent 
D) 70 percent 
E) 100 percent 
A) 25 percent 
B) 40 percent 
C) 60 percent 
D) 70 percent 
E) 100 percent

Question 3

Private markets can allocate resources optimally

Accepted Answer

A) under all circumstances 
B) only if property rights are well defined and can be easily enforced 
C) whenever property rights are well defined,regardless of whether they can be easily enforced 
D) whenever property rights can be easily enforced,regardless of whether they are well defined 
E) whenever there is no government intervention in the market 
A) under all circumstances 
B) only if property rights are well defined and can be easily enforced 
C) whenever property rights are well defined,regardless of whether they can be easily enforced 
D) whenever property rights can be easily enforced,regardless of whether they are well defined 
E) whenever there is no government intervention in the market

Question 4

Puerta Vallarta International Airport is near the coast.At night planes take off and land from the west,over the water.During the day planes approach and leave from the east,over Puerta Vallarta neighborhoods.Night flights into and out of Puerta Vallarta are more dangerous than day flights.Which rights are in conflict in this situation?

Accepted Answer

A) residents' right to enjoy the ocean and their right to peace and quiet 
B) residents' right to enjoy the ocean and air passengers' right to enjoy the ocean 
C) residents' right to peace and quiet and air passengers' right to safety 
D) residents' right to peace and quiet and safety 
E) air passengers' right to safety and convenience 
A) residents' right to enjoy the ocean and their right to peace and quiet 
B) residents' right to enjoy the ocean and air passengers' right to enjoy the ocean 
C) residents' right to peace and quiet and air passengers' right to safety 
D) residents' right to peace and quiet and safety 
E) air passengers' right to safety and convenience

Question 5

When an activity results in the imposition of external costs,markets will produce more than the socially optimal level of that activity.

Accepted Answer

A) True 
 B)False

Question 6

The May 2007 report from the Intergovernmental Panel on Climate Change suggested reforms that would not require any lifestyle changes.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 17-8  
-Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions on the marginal social benefit of education,how many years of education will they get?

Accepted Answer

A) 3 years 
B) 4 years 
C) 5 years 
D) 6 years 
E) 7 years 
A) 3 years 
B) 4 years 
C) 5 years 
D) 6 years 
E) 7 years

Question 8

Among the 25 most developed countries in the world where does the United States rank in terms of recycling?

Accepted Answer

A) 5th 
B) 10th 
C) 18th 
D) 20th 
E) 25th 
A) 5th 
B) 10th 
C) 18th 
D) 20th 
E) 25th

Question 9

Marginal social cost includes both the marginal private cost and the marginal external cost that production imposes on society

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 17-1  
-If technology is fixed,the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Accepted Answer

A) subsidizing the production of the good by $10 per unit 
B) taxing the firm producing the good by $10 per unit 
C) using a quota system to encourage production of at least 160 units of the good 
D) using a quota system to restrict production of the good to no more than 160 units 
E) letting the private market operate freely to determine output at equilibrium 
A) subsidizing the production of the good by $10 per unit 
B) taxing the firm producing the good by $10 per unit 
C) using a quota system to encourage production of at least 160 units of the good 
D) using a quota system to restrict production of the good to no more than 160 units 
E) letting the private market operate freely to determine output at equilibrium

Question 11

Cutting down tropical rainforests

Accepted Answer

A) provides long-term benefits to loggers 
B) may mean that possible cures for cancer are lost 
C) diminishes potential oil reserves 
D) means a reduction of carbon dioxide in the atmosphere 
E) means less erosion 
A) provides long-term benefits to loggers 
B) may mean that possible cures for cancer are lost 
C) diminishes potential oil reserves 
D) means a reduction of carbon dioxide in the atmosphere 
E) means less erosion

Question 12

Private property rights are easily assigned to open-access resources.

Accepted Answer

A) True 
 B)False

Question 13

Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal __________ is __________ __________ his personal marginal __________.

Accepted Answer

A) cost,greater than,benefit 
B) benefit,greater than,cost 
C) cost,equal to,benefit 
D) benefit,less than,cost 
E) benefit,equal to,cost 
A) cost,greater than,benefit 
B) benefit,greater than,cost 
C) cost,equal to,benefit 
D) benefit,less than,cost 
E) benefit,equal to,cost

Question 14

The marginal social cost of air quality increases as air quality increases.If the dirtiest production process would create 700 tons of pollutants,then

Accepted Answer

A) eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons 
B) eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons 
C) more damage will be done by the first 20 tons of pollution than by the last 20 tons 
D) more damage will be done by the last 20 tons of pollution than by the first 20 tons 
E) the optimal level of air quality is to reduce pollution by 700 tons 
A) eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons 
B) eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons 
C) more damage will be done by the first 20 tons of pollution than by the last 20 tons 
D) more damage will be done by the last 20 tons of pollution than by the first 20 tons 
E) the optimal level of air quality is to reduce pollution by 700 tons

Question 15

If the benefits to society of students attending college exceed benefits to the students,

Accepted Answer

A) higher education should be strictly regulated 
B) higher education should be taxed 
C) higher education provides a positive externality 
D) higher education is overproduced at the privately determined equilibrium 
E) in time,no higher education will be produced 
A) higher education should be strictly regulated 
B) higher education should be taxed 
C) higher education provides a positive externality 
D) higher education is overproduced at the privately determined equilibrium 
E) in time,no higher education will be produced

Question 16

The optimal level of air quality

Accepted Answer

A) is always zero 
B) occurs when the marginal social cost of air quality exceeds the marginal social benefit 
C) is greater if the marginal social benefit curve of air quality shifts rightward 
D) occurs when positive externalities are eliminated 
E) eliminates the common pool problem 
A) is always zero 
B) occurs when the marginal social cost of air quality exceeds the marginal social benefit 
C) is greater if the marginal social benefit curve of air quality shifts rightward 
D) occurs when positive externalities are eliminated 
E) eliminates the common pool problem

Question 17

Exhibit 17-1  
-In Exhibit 17-1,the equilibrium level of output determined by private decisions is

Accepted Answer

A) 0 units 
B) 100 units 
C) between 100 and 160 units 
D) 160 units 
E) the answer cannot be determined from the information given 
A) 0 units 
B) 100 units 
C) between 100 and 160 units 
D) 160 units 
E) the answer cannot be determined from the information given

Question 18

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

Accepted Answer

A) a paper mill that pollutes a river 
B) a person who throws a beer can out the window of a moving car 
C) cars,which emit carbon monoxide 
D) a solar water heater which is outside and obscure from view 
E) products that contribute to the greenhouse effect 
A) a paper mill that pollutes a river 
B) a person who throws a beer can out the window of a moving car 
C) cars,which emit carbon monoxide 
D) a solar water heater which is outside and obscure from view 
E) products that contribute to the greenhouse effect

Question 19

What kind of garbage tends to be recycled in the United States?

Accepted Answer

A) hazardous materials that must be transformed chemically into less dangerous substances 
B) biodegradable materials 
C) foodstuffs 
D) aluminum,paper,and other materials that have high commercial value 
E) appliances that can be salvaged from dumps and repaired 
A) hazardous materials that must be transformed chemically into less dangerous substances 
B) biodegradable materials 
C) foodstuffs 
D) aluminum,paper,and other materials that have high commercial value 
E) appliances that can be salvaged from dumps and repaired

Question 20

In order to increase society's total welfare,a production process that produces a negative externality should be

Accepted Answer

A) taxed 
B) provided by the government 
C) ignored 
D) subsidized 
E) exported 
A) taxed 
B) provided by the government 
C) ignored 
D) subsidized 
E) exported

Exam 19: Externalities and the Environment

Exhibit 17-9 -In Exhibit 17-9,the optimal water quality level is

How much of U.S.garbage is disposed of in landfills?

Private markets can allocate resources optimally

When an activity results in the imposition of external costs,markets will produce more than the socially optimal level of that activity.

The May 2007 report from the Intergovernmental Panel on Climate Change suggested reforms that would not require any lifestyle changes.

Exhibit 17-8 -Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions on the marginal social benefit of education,how many years of education will they get?

Among the 25 most developed countries in the world where does the United States rank in terms of recycling?

Marginal social cost includes both the marginal private cost and the marginal external cost that production imposes on society

Exhibit 17-1 -If technology is fixed,the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Cutting down tropical rainforests

Private property rights are easily assigned to open-access resources.

Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal __________ is __________ __________ his personal marginal __________.

The marginal social cost of air quality increases as air quality increases.If the dirtiest production process would create 700 tons of pollutants,then

If the benefits to society of students attending college exceed benefits to the students,

The optimal level of air quality

Exhibit 17-1 -In Exhibit 17-1,the equilibrium level of output determined by private decisions is

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

What kind of garbage tends to be recycled in the United States?

In order to increase society's total welfare,a production process that produces a negative externality should be

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Peyton Lopez will exploit the aquifer under his ranch as long as his personal marginal is his personal marginal .