Question 1

The socially efficient level of output is determined where

Accepted Answer

A)  marginal social cost equals marginal social benefit 
B)  marginal private cost equals marginal social benefit 
C)  average social cost equals average social benefit 
D)  average private cost equals average social benefit 
E)  total social cost equals total social benefit

Question 2

Mountain bikers and rollerbladers share the only trail in a city park.The city allows everyone into the park and onto the trail.The mountain bikers say the rollerbladers are a hazard to them;the rollerbladers say it's the other way around.Frequently there are collisions,and many injuries occur.What is the property rights problem?

Accepted Answer

A)  Rollerbladers do not have mountain bikes. 
B)  Bikers do not have rollerblades. 
C)  No one owns both bikes and blades. 
D)  No one has property rights to the use of the trail. 
E)  No one owns the park.

Question 3

Private property rights are easily assigned to open-access resources.

Accepted Answer

A) True 
 B)False

Question 4

Marginal social cost is equal to

Accepted Answer

A)  total private cost 
B)  marginal private cost 
C)  marginal external cost 
D)  marginal private cost plus marginal external cost 
E)  marginal private cost divided by marginal external cost

Question 5

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

Question 6

In Japan most garbage is

Accepted Answer

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

Question 7

A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day.Which of the following is true?

Accepted Answer

A)  The pollution will be created by those least willing and able to pay the damages. 
B)  The pollution will be created by those most willing and able to pay for the right to pollute. 
C)  The funds collected by the government will be enough to compensate any individuals harmed by the pollution. 
D)  Pollution will increase from zero to 1,000 units per day. 
E)  There will be no incentive for polluters to try to sneak emissions past government monitoring devices.

Question 8

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

Question 9

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

Question 10

The optimal level of water and air quality

Accepted Answer

A)  is zero,which is a pollution-free environment 
B)  occurs when the marginal private cost of air quality equals its marginal social cost 
C)  is greater if the marginal social cost curve of air quality shifts downward 
D)  occurs when all negative externalities are eliminated 
E)  eliminates the common pool problem

Question 11

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 12

When using the traditional command-and-control approach to environmental regulation,the government attempts to

Accepted Answer

A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement 
B)  determine the most efficient method for different industries 
C)  make allowances for differences across industries and between firms 
D)  set engineering standards that are applicable to all situations and does not recognize unique circumstances 
E)  set a maximum requirement and they allows the individual firm the latitude of choosing the most efficient method

Question 13

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

Question 14

The band Coldplay's funding of 10,000 mango trees in India to help sop up emissions related to the release of their CD,A Rush of Blood to the Head,is an example of fixed-production technology.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 17-2
 
-In Exhibit 17-2,the total social gain from producing the socially efficient output rather than the private equilibrium output is shown by area

Accepted Answer

A)  abdf 
B)  bed 
C)  bcd 
D)  acdf 
E)  bcde

Question 16

Most water pollution in the United States comes from manufacturing sites.

Accepted Answer

A) True 
 B)False

Question 17

In the production of electricity with fixed-production technology,the socially efficient price is $2 and the socially efficient level of output is 400 units;the market equilibrium price is $1.50 and the market equilibrium quantity is 600 units.The marginal external cost is:

Accepted Answer

A)  $0.20 
B)  $0.50 
C)  $1.50 
D)  $2.00 
E)  $3.50

Question 18

Exhibit 17-5
 
-In Exhibit 17-5,if the government sells the right to pollute 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

Question 19

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

Question 20

Exhibit 17-1
 
-In Exhibit 17-1,the amount by which the total social cost of producing the private equilibrium level of output exceeds the total social benefit is

Accepted Answer

A)  $300 
B)  $50 
C)  $5,000 
D)  $1,600 
E)  $8,000

Exam 17: Externalities and the Environment

The socially efficient level of output is determined where

Private property rights are easily assigned to open-access resources.

Marginal social cost is equal to

The Superfund was designed to clean up

In Japan most garbage is

A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day.Which of the following is true?

Society's total cost of producing a good

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 optimal level of water and air quality

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.

When using the traditional command-and-control approach to environmental regulation,the government attempts to

Which of the following creates a positive externality?

The band Coldplay's funding of 10,000 mango trees in India to help sop up emissions related to the release of their CD,A Rush of Blood to the Head,is an example of fixed-production technology.

Exhibit 17-2 -In Exhibit 17-2,the total social gain from producing the socially efficient output rather than the private equilibrium output is shown by area

Most water pollution in the United States comes from manufacturing sites.

In the production of electricity with fixed-production technology,the socially efficient price is $2 and the socially efficient level of output is 400 units;the market equilibrium price is $1.50 and the market equilibrium quantity is 600 units.The marginal external cost is:

Exhibit 17-5 -In Exhibit 17-5,if the government sells the right to pollute a river,

If producers cannot afford the fees for pollution rights,

Exhibit 17-1 -In Exhibit 17-1,the amount by which the total social cost of producing the private equilibrium level of output exceeds the total social benefit is