Question 1

If firms pollute when they produce,

Accepted Answer

A) marginal social cost equals marginal private cost 
B) marginal private cost exceeds marginal social cost 
C) marginal social cost exceeds marginal private cost 
D) marginal social cost equals marginal external cost 
E) marginal social cost equals marginal private cost,which equals marginal external cost 
A) marginal social cost equals marginal private cost 
B) marginal private cost exceeds marginal social cost 
C) marginal social cost exceeds marginal private cost 
D) marginal social cost equals marginal external cost 
E) marginal social cost equals marginal private cost,which equals marginal external cost

Question 2

If producers cannot afford the fees for pollution rights,

Accepted Answer

A) they will pollute 
B) they will buy pollution rights 
C) they will sell pollution rights 
D) they will have to find a cheaper way to deal with their pollution 
E) they will not be able to use their pollution rights 
A) they will pollute 
B) they will buy pollution rights 
C) they will sell pollution rights 
D) they will have to find a cheaper way to deal with their pollution 
E) they will not be able to use their pollution rights

Question 3

Dumping raw sewage into Boston Harbor is an example of

Accepted Answer

A) a negative externality 
B) a positive externality 
C) a private cost 
D) a sunk cost 
E) an inverse cost 
A) a negative externality 
B) a positive externality 
C) a private cost 
D) a sunk cost 
E) an inverse cost

Question 4

Environmental problems result when social costs and benefits are different from private costs and benefits.

Accepted Answer

A) True 
 B)False

Question 5

In order to increase society's well-being,education 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 6

Markets fail when externalities are present

Accepted Answer

A) because all of the costs and benefits of producing a good are reflected in the market price 
B) because some of the costs and benefits of producing a good are not reflected in the market price 
C) only if they are negative; positive externalities are not market failures 
D) because profits are not maximized 
E) if the positive externalities are less than the negative externalities 
A) because all of the costs and benefits of producing a good are reflected in the market price 
B) because some of the costs and benefits of producing a good are not reflected in the market price 
C) only if they are negative; positive externalities are not market failures 
D) because profits are not maximized 
E) if the positive externalities are less than the negative externalities

Question 7

Which of the following did not help account for the recent decline in the growth of trash-to-energy plants?

Accepted Answer

A) a decline in energy prices 
B) less favorable tax treatment 
C) a decline in the amount of garbage per capita 
D) the 1986 tax reform act 
E) environmental concerns over sites for the plants 
A) a decline in energy prices 
B) less favorable tax treatment 
C) a decline in the amount of garbage per capita 
D) the 1986 tax reform act 
E) environmental concerns over sites for the plants

Question 8

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Accepted Answer

A) True 
 B)False

Question 9

Which of the following creates a positive externality?

Accepted Answer

A) a paper mill polluting a river 
B) a stock market crash 
C) a neighbor that beautifies her lawn 
D) taxes and subsidies 
E) the greenhouse effect 
A) a paper mill polluting a river 
B) a stock market crash 
C) a neighbor that beautifies her lawn 
D) taxes and subsidies 
E) the greenhouse effect

Question 10

More water pollution in the United States comes from __________ than any other source.

Accepted Answer

A) factories 
B) sulfur dioxide (i.e.,acid rain) 
C) cars 
D) chemicals (used in pesticides and fertilizers)and sewage 
E) garbage 
A) factories 
B) sulfur dioxide (i.e.,acid rain) 
C) cars 
D) chemicals (used in pesticides and fertilizers)and sewage 
E) garbage

Question 11

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 12

Suppose research indicates that the effects of a one degree increase in Earth's average temperature would be much more devastating than previously believed.Therefore,the greater the marginal benefit of reducing greenhouse gases,other things constant,

Accepted Answer

A) the lower the optimal level of emissions 
B) the higher the optimal level of emissions 
C) the likelier that the level of emissions would have no effect 
D) the lower the optimal level of cleaner air 
E) None of the answers is correct 
A) the lower the optimal level of emissions 
B) the higher the optimal level of emissions 
C) the likelier that the level of emissions would have no effect 
D) the lower the optimal level of cleaner air 
E) None of the answers is correct

Question 13

If education creates positive externalities,

Accepted Answer

A) private markets provide less than the socially optimal quantity of education 
B) private markets provide more than the socially optimal quantity of education 
C) the marginal private benefit curve is higher than the marginal social benefit curve 
D) the marginal private cost curve is higher than the marginal social cost curve 
E) the government should impose a depletion tax 
A) private markets provide less than the socially optimal quantity of education 
B) private markets provide more than the socially optimal quantity of education 
C) the marginal private benefit curve is higher than the marginal social benefit curve 
D) the marginal private cost curve is higher than the marginal social cost curve 
E) the government should impose a depletion tax

Question 14

When a citizens' group opposes expansion of the prison located in town,the basis of the opposition is that the larger prison will produce

Accepted Answer

A) a negative externality for the community 
B) a positive externality for the community 
C) more jobs in the community 
D) tax revenue for the community 
E) improved criminal justice options 
A) a negative externality for the community 
B) a positive externality for the community 
C) more jobs in the community 
D) tax revenue for the community 
E) improved criminal justice options

Question 15

Pollution taxes are paid out of the EPA Superfund in order to reduce automobile emissions.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 17-6  
-In Exhibit 17-6,a per-unit subsidy of __________ would result in production of the socially optimal quantity.

Accepted Answer

A) $4 
B) $6 
C) $2 
D) $1.50 
E) $3.00 
A) $4 
B) $6 
C) $2 
D) $1.50 
E) $3.00

Question 17

Education confers positive externalities because

Accepted Answer

A) some education is done outside the market (i.e.,in public schools) 
B) curricula are regulated by the government,even in private schools 
C) an educated person consuming education gains many benefits he or she did not expect when the process started 
D) an educated person who has consumed education usually behaves in a way that benefits others 
E) education gives benefits to individuals in excess of the costs they pay to get it 
A) some education is done outside the market (i.e.,in public schools) 
B) curricula are regulated by the government,even in private schools 
C) an educated person consuming education gains many benefits he or she did not expect when the process started 
D) an educated person who has consumed education usually behaves in a way that benefits others 
E) education gives benefits to individuals in excess of the costs they pay to get it

Question 18

Exhibit 17-3  
-In Exhibit 17-3,the optimal air quality level is where the MSB=MSC.

Accepted Answer

A) True 
 B)False

Question 19

Society's total cost of producing a good

Accepted Answer

A) includes only the cost to the firm 
B) includes only the external cost 
C) includes all private and external costs 
D) equals the value of the output level that maximizes the firm's profit 
E) equals the value of the output level that minimizes the firm's loss 
A) includes only the cost to the firm 
B) includes only the external cost 
C) includes all private and external costs 
D) equals the value of the output level that maximizes the firm's profit 
E) equals the value of the output level that minimizes the firm's loss

Question 20

Exhibit 17-4  
-The supply curve in Exhibit 17-4 represents the amount of

Accepted Answer

A) pollution individuals and firms want to dump into the river 
B) the river that can still serve as a resource 
C) pollution the river can accept 
D) pollution the owner or manager of the resource is willing to clean up 
E) the pollution-causing good supplied by the industry 
A) pollution individuals and firms want to dump into the river 
B) the river that can still serve as a resource 
C) pollution the river can accept 
D) pollution the owner or manager of the resource is willing to clean up 
E) the pollution-causing good supplied by the industry

Exam 19: Externalities and the Environment

If firms pollute when they produce,

If producers cannot afford the fees for pollution rights,

Dumping raw sewage into Boston Harbor is an example of

Environmental problems result when social costs and benefits are different from private costs and benefits.

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

Markets fail when externalities are present

Which of the following did not help account for the recent decline in the growth of trash-to-energy plants?

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Which of the following creates a positive externality?

More water pollution in the United States comes from __________ than any other source.

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

Suppose research indicates that the effects of a one degree increase in Earth's average temperature would be much more devastating than previously believed.Therefore,the greater the marginal benefit of reducing greenhouse gases,other things constant,

If education creates positive externalities,

When a citizens' group opposes expansion of the prison located in town,the basis of the opposition is that the larger prison will produce

Pollution taxes are paid out of the EPA Superfund in order to reduce automobile emissions.

Exhibit 17-6 -In Exhibit 17-6,a per-unit subsidy of __________ would result in production of the socially optimal quantity.

Education confers positive externalities because

Exhibit 17-3 -In Exhibit 17-3,the optimal air quality level is where the MSB=MSC.

Society's total cost of producing a good

Exhibit 17-4 -The supply curve in Exhibit 17-4 represents the amount of

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Introduction to Macroeconomics

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understanding Graphs

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