Deck 16: Web: Economics of Life, Health, and the Environment

Question 1

Three students share an apartment. They are planning to buy a common television set and have decided to choose one among three different models through voting. Model A is the most expensive, Model B is neither too expensive nor too cheap, and Model C is the least expensive. The table below shows their respective preferences for each model.


-________analysis refers to the study of the prices of goods, services or jobs in terms of the prices of the characteristics that they embed.

A) Hedonic
B) Cost-benefit
C) Cardinal
D) Ordinal

Answer 1

Hedonic

Question 2

To an economist,_______

A) each good is priceless
B) human life does not have any value
C) each good is a substitute for another good
D) each good is a bundle of attributes

Answer 2

each good is a bundle of attributes

Question 3

According to the concept of hedonic analysis, how much a consumer is willing to pay for a good depends on_______.

A) its attributes
B) its elasticity of supply
C) its elasticity of demand
D) the availability of complimentary goods

Answer 3

its attributes

Question 4

The tool that is used for the analysis of consumers' willingness to pay and companies'willingness to supply the various characteristics embedded in a good is called _______.

A) hedonic analysis
B) cardinal analysis
C) ordinal analysis
D) cost-benefit analysis

Question 5

According to hedonic analysis, a person's willingness to pay for a house is most likely to depend on:

A) the number of rooms in the house.
B) the rate of interest for bank loans.
C) the inflation level in the economy.
D) the elasticity of supply of houses.

Question 6

A worker is willing to accept a high-risk job if he is paid $100 more than a low-risk job. This implies that _____.

A) the worker is a risk lover
B) the worker's minimum wage is $100
C) the worker is willing to pay a price of $100 for lower risk
D) the worker earns an incentive of $100 per month

Question 7

James received two job offers. Both the companies required him to do the same work. However, Company A offered him a salary of $2,000 per month while Company B offered him a salary of $2,400. James decided to take up the first offer because Company A's office was closer to his house than Company B's office. The compensating differential that James is willing to pay in this case is _______.

A) $400
B) $2,000
C) $2,400
D) $4,400

Question 8

Pat currently earns $4,250 per month. He is willing to work in a night shift if his employer pays him $500 more than what he gets for the day shift. This implies that Pat's compensating differential in this case is ________.

A) $500
B) $3,750
C) $4,750
D) $5,000

Question 9

If a worker decides to work at a job with a 0.05% probability of death for $5,000, what is the value of his statistical life?

A) $250
B) $5,250
C) $5,500,000
D) $10,000,000

Question 10

Thomas is a construction worker who earns $3,000 per month. He is offered a job of constructing a tall building in a city that has harsh weather conditions, for which he would be paid $3,500 a month. He takes up the job even though his previous job was less risky.

-Refer to the scenario above. His compensating differential is ________.

A) $500
B) $3,000
C) $3,500
D) $4.000

Question 11

Thomas is a construction worker who earns $3,000 per month. He is offered a job of constructing a tall building in a city that has harsh weather conditions, for which he would be paid $3,500 a month. He takes up the job even though his previous job was less risky.

-Refer to the scenario above. If construction workers in that city face a 0.01% higher chance of meeting with a fatal accident. The value of his statistical life is ________.

A) $1,000
B) $500,000
C) $1,000,000
D) $5,000,000

Question 12

A factory worker earned $1,500 per month. He left his previous job for a new one that paid him $200 more and required more physical effort.

-Refer to the scenario above. If there is a 0.03% higher chance of death in the new job, the value of the worker's statistical life is ________.

A) $10,600.33
B) $42,000
C) $666,666.67
D) $1,500,000

Question 13

John is willing to work at a job that has a 0.02% higher probability of death compared to his current job for $1,800 more per month. The value of his statistical life is ________.

A) $1,800
B) $3,600
C) $90,000
D) $9,000,000

Question 14

You have got two job offers from two different companies. The first company offered you a salary of $12,000 while the second one offered you a salary of $13,000. You decided to take up the first job after finding you that the company had been rated as a great place to work by an international agency while the other company has not been rated by them. What is your compensating differential in this case?

Question 15

Which of the following is likely to be an impact of an increase in life expectancy in a country when economic growth stagnates?

A) An increase in national income
B) A decrease in income inequality
C) A decrease in per capita income
D) An increase in the cost of medical care

Question 16

The workhorse approach in valuing medical innovations is a(n)________ analysis.

A) hedonic
B) cardinal
C) ordinal
D) cost-benefit

Question 17

Which of the following statement is true?

A) The average weight of women has decreased in the United States since the 1970s.
B) The percentage of men who are obese has nearly quadrupled since the 1970s.
C) The average weight of men has decreased in the United States since the 1970s.
D) The percentage of men who are obese has nearly halved since the 1970s in the United States.

Question 18

One justification for government involvement in research in general and medical research in particular is that research and innovation create ________.

A) negative externalities
B) positive externalities
C) economies of scale
D) diseconomies of scale

Question 19

Which of the following is true of Medicare?

A) Medicare is the largest public insurance program for Americans aged 65 and older.
B) Medicare is the largest private insurance program for low income groups.
C) Medicare has helped in reducing the mortality of the elderly significantly.
D) Medicare has increased the elderly's exposure to large medical expenditure risk.

Question 20

What was the main finding of Bleakley?s study on the relationship between childhood diseases or health conditions in childhood and economic conditions later in life?

Question 21

Does government funding for medical innovations have significant social value? Why or why not?

Question 22

Which type of health expenditure can significantly lower social value?

Question 23

What were the findings of the study conducted by economists Amy Finkelstein and Robin McKnight on Medicare?

Question 24

A tax used to internalize the social cost of pollution is called a(n) ________tax.

A) value-added
B) Pigouvian
C) excise
D) personal

Question 25

Which of the following is true of the relationship between marginal social cost (MSC) and marginal private cost (MPC) in the presence of a negative externality?

A) MSC equals the difference between MPC and the marginal external cost.
B) MSC is the product of MPC and the marginal external cost.
C) MSC is the sum of MPC and the marginal external cost.
D) MSC equals the sum of MPC and marginal abatement cost.

Question 26

Which of the following is an example of a negative externality?

A) Lung cancer due to passive smoking
B) Health problems due to consumption of excessive alcohol
C) Increased obesity rates due to consumption of junk food
D) Lower infant mortality due to the discovery of new vaccines

Question 27

In which of the following cases will the marginal social cost exceed the marginal private cost?

A) Smoking in a public place
B) Reading a book in a library
C) Listening to music on an iPod
D) Playing basketball in the gym

Question 28

The production of a good generates a foul-smelling gas which is released into air by factories producing the good.

-Refer to the scenario above. This implies that the production of the good gives rise to ________.

A) a positive externality
B) a negative externality
C) economies of scale
D) diseconomies of scale

Question 29

The production of a good generates a foul-smelling gas which is released into air by factories producing the good.

-Refer to the scenario above. Which of the following statements is true?

A) The equilibrium quantity of the good produced in the market equals the socially optimal level.
B) The equilibrium price of the good produced in the market equals the socially optimal price.
C) The equilibrium quantity of the good produced in the market is likely to be less than the socially optimal level.
D) The equilibrium quantity of the good produced in the market is likely to exceed the socially optimal level.

Question 30

The production of a good generates a foul-smelling gas which is released into air by factories producing the good.

-Refer to the scenario above. Which of the following will help in internalizing the cost to society from pollution?

A) A Pigouvian tax
B) A Pigouvian subsidy
C) A price ceiling
D) A price floor

Question 31

The diagram below shows the demand curve, supply curve, and the marginal social cost curve for a manufacturing unit.


-Refer to the scenario above. The equilibrium output produced in the market is______ units

A) 300
B) 400
C) 500
D) 600

Question 32

The diagram below shows the demand curve, supply curve, and the marginal social cost curve for a manufacturing unit.


-Refer to the scenario above. The external cost at each level of output is ________.

A) $1
B) $1.50
C) $2
D) $2.50

Question 33

The diagram below shows the demand curve, supply curve, and the marginal social cost curve for a manufacturing unit.


-Refer to the scenario above. In order to ensure that the manufacturing unit produces the socially optimal level of output, the government should________.

A) impose a per unit tax of $1
B) impose a per unit tax of $2
C) provide a subsidy of $1 per unit
D) provide a subsidy of $2 per unit

Question 34

The diagram below shows the demand curve, supply curve, and the marginal social cost curve for a manufacturing unit.


-Refer to the scenario above. If the government imposes a tax of _______,output will ______.

A) $1; fall below the socially optimal level
B) $2; rise above the socially optimal level
C) $2.50; fall below the socially optimal level
D) $4.50; rise above the competitive level

Question 35

The figure below shows the marginal social cost (MSC) curve, marginal private cost (MPC) curve and demand (D) curve for a good.


-Refer to the figure above. Which of the following is true in this case?

A) The production of the good involves a positive externality.
B) The production of the good involves a negative externality.
C) The production of the good is subsidized by the government.
D) The production of the good in the competitive market leads to a net increase in total surplus.

Question 36

The figure below shows the demand, supply and marginal social cost curves for a steel plant.


-Refer to the scenario above. The equilibrium output produced in the market is _______units.

A) 150
B) 200
C) 250
D) 300

Question 37

The figure below shows the demand, supply and marginal social cost curves for a steel plant.


-Refer to the scenario above. If the government imposes a tax of_____ , output will_____ .

A) $1; fall below the socially optimal level
B) $2; rise above the socially optimal level
C) $10; fall below the socially optimal level
D) $10; rise above the competitive level

Question 38

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. If neither company spends money on pollution abatement, each of them will emit ________.

A) 0 ton
B) 10 tons
C) 40 tons
D) 50 tons

Question 39

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. The marginal cost of reducing 20 tons of emission for Company X is ________.

A) $1,000
B) $2,000
C) $2,500
D) $3,000

Question 40

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. The marginal cost of reducing 20 tons of emission for Company Y is ________.

A) $1,000
B) $2,000
C) $2,500
D) $3,000

Question 41

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. If the government sets a pollution cap of 30 tons of emission per firm, Company X will incur an abatement cost of ________.

A) $1,000
B) $1,500
C) $2,500
D) $3,000

Question 42

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. If the government sets a pollution cap of 30 tons of emission per firm, Company Y will incur an abatement cost of ________.

A) $1,000
B) $2,000
C) $3,000
D) $4,500

Question 43

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. Assume that firms are allowed to buy and sell permits. If the government allocates 30 pollution permits to each company and the price of each permit is $1,500, Company X will reduce its emission to ________.

A) 5 tons
B) 10 tons
C) 15 tons
D) 20 tons

Question 44

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. Assume that firms are allowed to buy and sell permits. If the government allocates 30 pollution permits to each company and the price of each permit is $1,500, Company Y will reduce its emission to ________.

A) 10 tons
B) 20 tons
C) 30 tons
D) 40 tons

Question 45

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. Which of the following will happen if the government allocates 30 pollution permits to each company and the price of each permit is $1,500?

A) Company X will sell 10 permits to Company Y.
B) Company X will sell 20 permits to Company Y.
C) Company X will buy 20 permits from Company Y.
D) Company X will buy 10 permits from Company Y.

Question 46

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the figure above. Suppose the government allocates 30 pollution permits to each company and the price of each permit is $1,500. Company ________will earn ________. by selling permits

A) X; $1,000
B) X; $15,000
C) Y; $10,000
D) Y; $1,500

Question 47

The figure below shows the marginal pollution abatement cost curves of two firms- Company X and Company Y.


-Refer to the scenario above. Suppose the government allocates 30 pollution permits to each company and the price of each permit is $1,500. Company ________ will spend ________on buying permits.

A) X; $1,000
B) X; $1,500
C) Y; $10,000
D) Y; $15,000

Question 48

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. If neither company spends money on pollution abatement, each of them will emit ________.

A) 0 ton
B) 100 tons
C) 200 tons
D) 400 tons

Question 49

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. The marginal cost of reducing emission by 100 tons for Alpha Electric is ________.

A) $100
B) $200
C) $350
D) $400

Question 50

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. The marginal cost of reducing 100 tons of emission for Beta Inc. is ________.

A) $100
B) $200
C) $400
D) $600

Question 51

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. If the government sets a pollution cap of 200 tons of emission, Alpha Electric will incur an abatement cost of ________.

A) $100
B) $200
C) $300
D) $600

Question 52

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. If the government sets a pollution cap of 200 tons of emission, Beta Inc. will incur an abatement cost of ________.

A) $100
B) $200
C) $300
D) $400

Question 53

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. If the government sets a pollution cap of 200 tons of emission, Beta Inc. will incur an abatement cost of ________.

A) 0 ton
B) 100 tons
C) 200 tons
D) 300 tons

Question 54

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. Assume that firms are allowed to buy and sell permits. If the government allocates 200 pollution permits to each company and the price of each permit is $300, Beta Inc. will reduce its emission to ________.

A) 100 tons
B) 250 tons
C) 300 tons
D) 350 tons

Question 55

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. Which of the following will happen if the government allocates 200 pollution permits to each company and the price of each permit is $300?

A) Alpha Electric will want to sell 100 permits to Beta Inc.
B) Alpha Electric will want to sell all the permits to Beta Inc.
C) Alpha Electric will want to buy all the permits from Beta Inc.
D) Alpha Electric will want to buy 100 permits from Beta Inc.

Question 56

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. Which of the following will happen if the government allocates 200 pollution permits to each company and the price of each permit is $300?

A) Beta Inc. will sell 50 permits to Alpha Electric.
B) Beta Inc. will sell all the permits to Alpha Electric.
C) Beta Inc. will buy all the permits from Alpha Electric.
D) Beta Inc. will buy 50 permits from Alpha Electric.

Question 57

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the figure above. Suppose the government allocates 250 pollution permits to each company and the price of each permit is $200. ________will earn ________by selling permits.

A) Alpha Electric; $1,000
B) Alpha Electric; $10,000
C) Alpha Electric; $1,000.
D) Alpha Electric; $15,000

Question 58

The figure below shows the marginal pollution abatement costs of two companies - Alpha Electric and Beta Inc.


-Refer to the scenario above. Suppose the government allocates 250 pollution permits to each company and the price of each permit is $200. ________ will spend ________on buying permits.

A) Beta Inc.; $1,000
B) Beta Inc.; $1,500
C) Beta Inc.; $1,000.
D) Beta Inc.; $10,000

Question 59

Briefly explain one potential problem with Pigouvian taxes.

Question 60

What was the effect of the Clean Air Act on housing prices according to economists Kenneth Chay and Michael Greenstone?

Question 61

What are the usual tools used by the government to reduce pollution and protect the environment?

Question 62

Suppose each firm in an industry is allocated 120 emission permits by the government. Each permit enables the firms to emit 120 tons of pollution. The diagram below shows the cost of pollution abatement curve for a firm in this industry.
How many permits is this firm likely to buy and why?

Question 63

The production of Dorexcyl, an industrial chemical , releases fumes that cause breathing difficulties. Is the quantity of the chemical produced under competitive market conditions optimal? Explain with the help of a suitable diagram, how a Pigouvian tax can help to internalize such an externality.

Question 64

Environmental disaster in Easter Island is an example of _____.

A) diseconomies of scale
B) the tragedy of the commons
C) the paradox of thrift
D) a pecuniary externality

Question 65

Why should economists study climate change?

Question 66

What is the importance of technology in the economics of climate change?

Question 67

List two ways in which we can use technology to reduce carbon emissions.

Question 68

What is ?carbon capture?? Is it a worthwhile cost to bear to reduce carbon consumption?