Question 1

Which of the following is most likely to happen to open-access wildlife resources?

Accepted Answer

A)  They will be used efficiently. 
B)  They will not be used at all. 
C)  It will be unprofitable to use them. 
D)  They will be used but will generate no profit. 
E)  They will become extinct. 
A)  They will be used efficiently. 
B)  They will not be used at all. 
C)  It will be unprofitable to use them. 
D)  They will be used but will generate no profit. 
E)  They will become extinct. E

Question 2

When consuming a good creates positive externalities,

Accepted Answer

A)  private demand increases 
B)  private demand 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 increases without government intervention 
A)  private demand increases 
B)  private demand 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 increases without government intervention D

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

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 5

In the United States, what percentage of smog comes from manufacturing sites?

Accepted Answer

A)  5 percent 
B)  15 percent 
C)  25 percent 
D)  40 percent 
E)  80 percent 
A)  5 percent 
B)  15 percent 
C)  25 percent 
D)  40 percent 
E)  80 percent

Question 6

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 determines that the day care center has the property right. What would be the optimal solution to this problem?

Accepted Answer

A)  The factory should install sound insulation because that is cheaper than moving. 
B)  The factory should pay the day care center to move. 
C)  The factory should buy insulation for the day care center. 
D)  The day care center should buy its own insulation. 
E)  The day care center should move. 
A)  The factory should install sound insulation because that is cheaper than moving. 
B)  The factory should pay the day care center to move. 
C)  The factory should buy insulation for the day care center. 
D)  The day care center should buy its own insulation. 
E)  The day care center should move.

Question 7

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 8

The optimal level of air quality

Accepted Answer

A)  is 100 percent, which creates a pollution-free environment 
B)  is smaller the lower the marginal social cost of air quality 
C)  is greater the lower the marginal social benefit of air quality 
D)  is greater the lower the marginal social cost of air quality 
E)  is smaller the greater the marginal social benefit of air quality 
A)  is 100 percent, which creates a pollution-free environment 
B)  is smaller the lower the marginal social cost of air quality 
C)  is greater the lower the marginal social benefit of air quality 
D)  is greater the lower the marginal social cost of air quality 
E)  is smaller the greater the marginal social benefit of air quality

Question 9

The marginal social benefit curve for water quality slopes downward because

Accepted Answer

A)  the total benefit from clean water decreases as water becomes cleaner 
B)  the added benefit from cleaner water is greater when water quality is poor than when water quality is high 
C)  the added benefit from cleaner water is smaller when water quality is poor than when water quality is high 
D)  the total benefit from clean water increases as water becomes cleaner 
E)  people demand clean water at any price 
A)  the total benefit from clean water decreases as water becomes cleaner 
B)  the added benefit from cleaner water is greater when water quality is poor than when water quality is high 
C)  the added benefit from cleaner water is smaller when water quality is poor than when water quality is high 
D)  the total benefit from clean water increases as water becomes cleaner 
E)  people demand clean water at any price

Question 10

Governments often subsidize activities that generate positive externalities in order to get people to engage in more of them.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following provides a positive externality?

Accepted Answer

A)  smog 
B)  inoculating children against measles 
C)  hamburgers 
D)  litter 
E)  an increase in your earnings 
A)  smog 
B)  inoculating children against measles 
C)  hamburgers 
D)  litter 
E)  an increase in your earnings

Question 14

Robert Iwasaki lives next door to a toxic waste landfill. Katie Cooley lives five miles downstream from a steel plant that dumps waste into Mill Creek. Which person is more likely to press public officials for a cleaner environment?

Accepted Answer

A)  Katie 
B)  Robert 
C)  neither 
D)  both equally 
E)  Economics cannot answer this question 
A)  Katie 
B)  Robert 
C)  neither 
D)  both equally 
E)  Economics cannot answer this question

Question 15

The optimal level of pollution is

Accepted Answer

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

Question 16

NARRBEGIN: Exhibit 17-6
Exhibit 17-6
  
-In Exhibit 17-6, an unregulated market would produce

Accepted Answer

A)  0 units 
B)  10 units 
C)  20 units 
D)  40 units 
E)  50 units 
A)  0 units 
B)  10 units 
C)  20 units 
D)  40 units 
E)  50 units

Question 17

In Japan, recycling is prevalent and landfill use is small relative to the United States because

Accepted Answer

A)  the Japanese are more conscientious 
B)  there is no externality problem there 
C)  land is relatively more scarce in Japan 
D)  the Japanese have better recycling technology 
E)  littering is illegal there 
A)  the Japanese are more conscientious 
B)  there is no externality problem there 
C)  land is relatively more scarce in Japan 
D)  the Japanese have better recycling technology 
E)  littering is illegal there

Question 18

Deforestation is occurring in tropical areas because

Accepted Answer

A)  long-run economic considerations outweigh short-run considerations 
B)  global economic considerations outweigh domestic considerations 
C)  tropical soil is good for growing farm crops 
D)  the value of jobs created by deforestation exceeds the cost to society 
E)  there is no property right to the earth's climate 
A)  long-run economic considerations outweigh short-run considerations 
B)  global economic considerations outweigh domestic considerations 
C)  tropical soil is good for growing farm crops 
D)  the value of jobs created by deforestation exceeds the cost to society 
E)  there is no property right to the earth's climate

Question 19

NARRBEGIN: Exhibit 17-5
Exhibit 17-5
  
-In Exhibit 17-5, if the government does not charge firms for emitting pollutants into a river,

Accepted Answer

A)  firms will emit Q1 units of pollutant at a price of P0 each 
B)  firms will emit Q2 units of pollutant at a price of P0 each 
C)  firms will emit Q0 units of pollutant at a price of P3 each 
D)  firms will emit Q1 units of pollutant at a price of P1 each 
E)  firms will emit Q2 units of pollutant at a price of P3 each 
A)  firms will emit Q1 units of pollutant at a price of P0 each 
B)  firms will emit Q2 units of pollutant at a price of P0 each 
C)  firms will emit Q0 units of pollutant at a price of P3 each 
D)  firms will emit Q1 units of pollutant at a price of P1 each 
E)  firms will emit Q2 units of pollutant at a price of P3 each

Question 20

Control of water pollution from pesticide runoff in the United States is the responsibility of

Accepted Answer

A)  the U.S. Department of Agriculture 
B)  the Environmental Protection Agency 
C)  state attorneys general 
D)  state departments of agriculture 
E)  state environmental protection agencies 
A)  the U.S. Department of Agriculture 
B)  the Environmental Protection Agency 
C)  state attorneys general 
D)  state departments of agriculture 
E)  state environmental protection agencies

Exam 17: Externalities and the Environment

Which of the following is most likely to happen to open-access wildlife resources?

When consuming a good creates positive externalities,

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

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

In the United States, what percentage of smog comes from manufacturing sites?

If education creates positive externalities,

The optimal level of air quality

The marginal social benefit curve for water quality slopes downward because

Governments often subsidize activities that generate positive externalities in order to get people to engage in more of them.

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

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

Which of the following provides a positive externality?

Robert Iwasaki lives next door to a toxic waste landfill. Katie Cooley lives five miles downstream from a steel plant that dumps waste into Mill Creek. Which person is more likely to press public officials for a cleaner environment?

The optimal level of pollution is

NARRBEGIN: Exhibit 17-6 Exhibit 17-6 -In Exhibit 17-6, an unregulated market would produce

In Japan, recycling is prevalent and landfill use is small relative to the United States because

Deforestation is occurring in tropical areas because

NARRBEGIN: Exhibit 17-5 Exhibit 17-5 -In Exhibit 17-5, if the government does not charge firms for emitting pollutants into a river,

Control of water pollution from pesticide runoff in the United States is the responsibility of

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

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

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters