Question 1

Depletion of tropical rainforests is an example of

Accepted Answer

A)  a negative externality 
B)  the use of variable technology 
C)  adverse selection 
D)  the use of fixed technology 
E)  a clearly defined property right 
A)  a negative externality 
B)  the use of variable technology 
C)  adverse selection 
D)  the use of fixed technology 
E)  a clearly defined property right

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

Accepted Answer

A)  The class has no property right to a quiet environment. 
B)  The club has a property right on the ground floor. 
C)  The class has a property right on the second floor. 
D)  The club uses an inappropriate technology (i.e., no soundproofing). 
E)  Both the club and class are profitable. 
A)  The class has no property right to a quiet environment. 
B)  The club has a property right on the ground floor. 
C)  The class has a property right on the second floor. 
D)  The club uses an inappropriate technology (i.e., no soundproofing). 
E)  Both the club and class are profitable.

Question 4

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 5

Other things equal, if the government increased the quantity of pollution rights to be sold,

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 6

An increase in the marginal cost of reducing greenhouse gas emissions will lead to lower air quality.

Accepted Answer

A) True 
 B)False

Question 7

If production is characterized by variable technology, the optimal level of air quality occurs where

Accepted Answer

A)  the marginal private cost of air quality equals the marginal social benefit 
B)  the marginal social cost of air quality equals the marginal social benefit 
C)  the marginal social cost of air quality equals the marginal private cost of air quality 
D)  government regulators set it 
E)  all costs are absorbed by the polluter 
A)  the marginal private cost of air quality equals the marginal social benefit 
B)  the marginal social cost of air quality equals the marginal social benefit 
C)  the marginal social cost of air quality equals the marginal private cost of air quality 
D)  government regulators set it 
E)  all costs are absorbed by the polluter

Question 8

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 9

In a free market, a firm's rate of output is determined

Accepted Answer

A)  where marginal social cost equals marginal social benefit 
B)  where marginal private benefit equals marginal social benefit 
C)  where marginal social cost equals marginal private cost 
D)  where marginal private cost equals marginal private benefit 
E)  by government 
A)  where marginal social cost equals marginal social benefit 
B)  where marginal private benefit equals marginal social benefit 
C)  where marginal social cost equals marginal private cost 
D)  where marginal private cost equals marginal private benefit 
E)  by government

Question 10

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 11

In the absence of government intervention, the marginal social cost of pollution abatement would equal its marginal social benefit.

Accepted Answer

A) True 
 B)False

Question 12

Markets for pollution rights

Accepted Answer

A)  have never been tried in the United States 
B)  assign property rights to those who value them least 
C)  allow the government to assign property rights 
D)  enable those who value them most to pollute 
E)  are less efficient than pollution standards 
A)  have never been tried in the United States 
B)  assign property rights to those who value them least 
C)  allow the government to assign property rights 
D)  enable those who value them most to pollute 
E)  are less efficient than pollution standards

Question 13

Which of the following is an example of an open-access resource?

Accepted Answer

A)  a city subway system 
B)  a college education 
C)  an elementary school education 
D)  whales in the ocean 
E)  pandas in the zoo 
A)  a city subway system 
B)  a college education 
C)  an elementary school education 
D)  whales in the ocean 
E)  pandas in the zoo

Question 14

NARRBEGIN: Exhibit 17-6
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

Depletion of tropical rainforests is an example of

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

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

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

Other things equal, if the government increased the quantity of pollution rights to be sold,

An increase in the marginal cost of reducing greenhouse gas emissions will lead to lower air quality.

If production is characterized by variable technology, the optimal level of air quality occurs where

If producers cannot afford the fees for pollution rights,

In a free market, a firm's rate of output is determined

Education confers positive externalities because

In the absence of government intervention, the marginal social cost of pollution abatement would equal its marginal social benefit.

Markets for pollution rights

Which of the following is an example of an open-access resource?

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

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

Exam 17: Externalities and the Environment

Depletion of tropical rainforests is an example of

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

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

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

Other things equal, if the government increased the quantity of pollution rights to be sold,

An increase in the marginal cost of reducing greenhouse gas emissions will lead to lower air quality.

If production is characterized by variable technology, the optimal level of air quality occurs where

If producers cannot afford the fees for pollution rights,

In a free market, a firm's rate of output is determined

Education confers positive externalities because

In the absence of government intervention, the marginal social cost of pollution abatement would equal its marginal social benefit.

Markets for pollution rights

Which of the following is an example of an open-access resource?

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

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