Question 1

The common pool problem

Accepted Answer

A)  occurs whenever goods are not rivals in consumption 
B)  is an example of adverse selection 
C)  arises whenever property rights are well defined 
D)  is usually caused by government intervention into private markets 
E)  is one in which resources to which access is unrestricted will tend to be overused 
A)  occurs whenever goods are not rivals in consumption 
B)  is an example of adverse selection 
C)  arises whenever property rights are well defined 
D)  is usually caused by government intervention into private markets 
E)  is one in which resources to which access is unrestricted will tend to be overused

Question 2

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 3

The United States recycles a greater portion of its garbage than Japan does.

Accepted Answer

A) True 
 B)False

Question 4

Fish are

Accepted Answer

A)  always renewable resources 
B)  renewable resources whenever property rights are well defined 
C)  renewable resources if they are taken and replaced at rates that provide a steady supply 
D)  renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E)  renewable resources whenever property rights are well defined and can be easily enforced 
A)  always renewable resources 
B)  renewable resources whenever property rights are well defined 
C)  renewable resources if they are taken and replaced at rates that provide a steady supply 
D)  renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E)  renewable resources whenever property rights are well defined and can be easily enforced

Question 5

Most 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)  cleanup and rehabilitation of polluted areas 
E)  development and installation of antipollution devices 
A)  education of the public on environmental issues 
B)  research 
C)  court costs and legal fees 
D)  cleanup and rehabilitation of polluted areas 
E)  development and installation of antipollution devices

Question 6

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans, chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

Accepted Answer

A) True 
 B)False

Question 7

In Japan most garbage is

Accepted Answer

A)  either recycled or burned 
B)  recycled 
C)  burned 
D)  deposited in landfills 
E)  used for fuel 
A)  either recycled or burned 
B)  recycled 
C)  burned 
D)  deposited in landfills 
E)  used for fuel

Question 8

Untreated raw sewage is dumped directly into rivers and oceans

Accepted Answer

A)  only in less-developed economies 
B)  only in rural areas 
C)  only in urban areas 
D)  in every large city in the United States 
E)  in some of the largest U.S. cities 
A)  only in less-developed economies 
B)  only in rural areas 
C)  only in urban areas 
D)  in every large city in the United States 
E)  in some of the largest U.S. cities

Question 9

Oil is an example of a renewable resource.

Accepted Answer

A) True 
 B)False

Question 10

In order to increase society's well-being, measles vaccinations 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 11

When a resource is an open-access resource,

Accepted Answer

A)  each individual in the society owns it 
B)  the group owns it 
C)  no one owns it 
D)  the government owns it 
E)  some nonprofit agency owns it 
A)  each individual in the society owns it 
B)  the group owns it 
C)  no one owns it 
D)  the government owns it 
E)  some nonprofit agency owns it

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

According to Coase,

Accepted Answer

A)  government regulation will almost always be necessary to eliminate negative externalities 
B)  externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C)  when bargaining costs are high, it is necessary to assign property rights 
D)  assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E)  there really is no externality problem with renewable resources 
A)  government regulation will almost always be necessary to eliminate negative externalities 
B)  externality problems can be solved efficiently by the assignment of property rights if transaction costs are low 
C)  when bargaining costs are high, it is necessary to assign property rights 
D)  assignment of property rights will lead to equitable but inefficient solutions to externality problems 
E)  there really is no externality problem with renewable resources

Question 14

The socially optimal amount of pollution abatement may be less than 100 percent.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following can be a renewable resource?

Accepted Answer

A)  oil 
B)  timber 
C)  coal 
D)  iron ore 
E)  uranium 
A)  oil 
B)  timber 
C)  coal 
D)  iron ore 
E)  uranium

Question 16

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 initially determines that the day care center has the property right and orders the factory to purchase insulation for the day care. But on appeal the factory is awarded the property right. How would the optimal solution to this problem change after the appeals court decision?

Accepted Answer

A)  The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation, a result consistent with the Coase theorem. 
A)  The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem. 
B)  Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem. 
C)  Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem. 
D)  Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem. 
E)  The day care center would move instead of buying insulation, a result consistent with the Coase theorem.

Question 17

When the benefits to society of using a product exceed benefits to the user,

Accepted Answer

A)  the product should be strictly regulated 
B)  the product should be taxed 
C)  the product provides a positive externality 
D)  the product is overproduced at the privately determined equilibrium 
E)  in time the product will not be produced 
A)  the product should be strictly regulated 
B)  the product should be taxed 
C)  the product provides a positive externality 
D)  the product is overproduced at the privately determined equilibrium 
E)  in time the product will not be produced

Question 18

Government restrictions on the use of an open-access resource

Accepted Answer

A)  may improve efficiency 
B)  will decrease efficiency 
C)  are unnecessary 
D)  contribute to pollution of the resource 
E)  contribute to depletion of the resource 
A)  may improve efficiency 
B)  will decrease efficiency 
C)  are unnecessary 
D)  contribute to pollution of the resource 
E)  contribute to depletion of the resource

Question 19

Suppose that the city builds a new park that is advertised as being "open to the public," and within two months the grass in the park is ruined by overuse. This would be an example of

Accepted Answer

A)  a nonrenewable resource 
B)  a private good 
C)  the common pool problem 
D)  a positive externality 
E)  a renewable and excludable resource 
A)  a nonrenewable resource 
B)  a private good 
C)  the common pool problem 
D)  a positive externality 
E)  a renewable and excludable resource

Question 20

The Superfund was designed to clean up

Accepted Answer

A)  the acid rain problem 
B)  air pollution from automobiles, buses, and trucks 
C)  water pollution from agricultural sources (i.e., pesticides) 
D)  water pollution from dumping raw sewage 
E)  toxic waste dumps 
A)  the acid rain problem 
B)  air pollution from automobiles, buses, and trucks 
C)  water pollution from agricultural sources (i.e., pesticides) 
D)  water pollution from dumping raw sewage 
E)  toxic waste dumps

Exam 17: Externalities and the Environment

The common pool problem

Dumping raw sewage into Boston Harbor is an example of

The United States recycles a greater portion of its garbage than Japan does.

Fish are

Most of the Superfund has been spent on

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans, chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

In Japan most garbage is

Untreated raw sewage is dumped directly into rivers and oceans

Oil is an example of a renewable resource.

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

When a resource is an open-access resource,

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,

According to Coase,

The socially optimal amount of pollution abatement may be less than 100 percent.

Which of the following can be a renewable resource?

When the benefits to society of using a product exceed benefits to the user,

Government restrictions on the use of an open-access resource

Suppose that the city builds a new park that is advertised as being "open to the public," and within two months the grass in the park is ruined by overuse. This would be an example of

The Superfund was designed to clean up

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

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