Question 1

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) the average benefit of clean water is higher.

Question 2

The following graph shows the demand, the supply, and the marginal social benefit curves. The socially efficient level of output is _______.​ ​
Figure 17.6
​

Accepted Answer

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

Question 3

Which of the following is a positive externality?​

Accepted Answer

A) Inoculations against a disease that reduce the likelihood of transmitting it to others 
B) Phosphates from laundry detergents​ 
C) Litter from fast food containers​ 
D) Ozone depletion due to the production of fast food containers​ 
E) The greenhouse effect​

Question 4

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 private cost. 
D) average private cost equals average social benefit. 
E) total social cost equals total social benefit.

Question 5

Marginal social cost includes both the marginal private cost and the marginal external cost that production imposes on society.​

Accepted Answer

A) True 
 B)False

Question 6

If the marginal social cost of producing a good exceeds the marginal private cost, then:​

Accepted Answer

A) the quantity of the good being produced is too less. 
B) the price charged for the good is too high. 
C) the good produces a positive externality. 
D) the good produces a negative externality. 
E) social welfare is likely to increase by producing more of the good.

Question 7

An individual who listens to loud music late in the night is creating:​

Accepted Answer

A) a positive externality. 
B) a common-pool problem. 
C) a negative externality. 
D) a free-rider problem. 
E) asymmetric information.

Question 8

Which of the following accounts for the recent decline in the growth of trash-to-energy plants?​

Accepted Answer

A) Decline in energy prices 
B) Less favorable tax treatment​ 
C) Decline in the amount of garbage per capita​ 
D) Removal of subsidies​ 
E) High cost of legal consultation​

Question 9

If the consumption of education creates a positive externality, then to increase efficiency relative to the outcome determined by private decisions, _____.​

Accepted Answer

A) more public education should be produced 
B) the same amount of education must be produced and the price should be lower​ 
C) less education must be produced and the price should be higher​ 
D) less education must be produced and the price should be lower​ 
E) less education must be produced at the same price​

Question 10

Marginal social cost is equal to:​

Accepted Answer

A) the total private cost of production. 
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 11

The following graph shows market equilibrium in the presence of an externality. The total social gain from producing the socially efficient output is:​ ​
Figure 17.2
​

Accepted Answer

A) $60. 
B) $30. 
C) $6. 
D) $480. 
E) $300.

Question 12

The optimal level of air quality will increase if:​

Accepted Answer

A) the cost of polluting increases. 
B) price of pollution reducing equipment increases. 
C) a new process allows pollution to be removed more cheaply. 
D) the marginal social cost of air quality increases. 
E) the marginal social benefit of air quality decreases.

Question 13

The deforestation of rainforests due to human activities has increased because:​

Accepted Answer

A) long-run economic considerations outweigh short-run considerations. 
B) global economic considerations outweigh domestic considerations​ 
C) private property rights can be enforced on rainforests. 
D) the value of the jobs created by deforestation exceeds the cost to society. 
E) there are no property rights on rainforests.

Question 14

The following graph shows the market for pollution rights. The supply curve represents the amount of ______.​ ​
Figure 17.4
​

Accepted Answer

A) toxins the firms want to dump into the river 
B) water that can be used as an input by firms​ 
C) toxins that can be dumped into the river without reducing the water quality below a certain level​ 
D) pollution the firm is willing to clean up​ 
E) the pollution-causing good supplied by the industry​

Question 15

A person can cause a negative externality by_______.​

Accepted Answer

A) being immunized 
B) having a loud conversation in the office​ 
C) landscaping her lawn​ 
D) paying taxes​ 
E) attending school​

Question 16

The common-pool problem arises:​

Accepted Answer

A) when goods are not rival in consumption. 
B) in the presence of asymmetric information. 
C) when property rights are well defined. 
D) when exhaustible resources are overused. 
E) when renewable resources are overused.

Question 17

Open-access resources tend to be ______.​

Accepted Answer

A) conserved 
B) taxed​ 
C) overused​ 
D) efficiently used​ 
E) underutilized​

Question 18

If education creates positive externalities, then:​

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.

Question 19

Markets tend to underproduce goods that generate positive externalities.​

Accepted Answer

A) True 
 B)False

Question 20

The main objective of the Comprehensive Environmental Response, Compensation, and Liability Act, was to ensure that:​

Accepted Answer

A) companies that generated hazardous wastes pay to clean up any wastes that are improperly disposed. 
B) individuals who dispose garbage and other hazardous wastes in rivers pay for the cleanup of rivers. 
C) automobile emissions are reduced by 90 percent. 
D) all waste products are converted into reusable materials. 
E) harmful pesticides are not used by farmers.

Exam 17: Externalities and the Environment

The marginal social benefit curve for water quality slopes downward because:

The following graph shows the demand, the supply, and the marginal social benefit curves. The socially efficient level of output is _______. Figure 17.6

Which of the following is a positive externality?

The socially efficient level of output is determined where:

Marginal social cost includes both the marginal private cost and the marginal external cost that production imposes on society.

If the marginal social cost of producing a good exceeds the marginal private cost, then:

An individual who listens to loud music late in the night is creating:

Which of the following accounts for the recent decline in the growth of trash-to-energy plants?

If the consumption of education creates a positive externality, then to increase efficiency relative to the outcome determined by private decisions, _____.

Marginal social cost is equal to:

The following graph shows market equilibrium in the presence of an externality. The total social gain from producing the socially efficient output is: Figure 17.2

The optimal level of air quality will increase if:

The deforestation of rainforests due to human activities has increased because:

The following graph shows the market for pollution rights. The supply curve represents the amount of ______. Figure 17.4

A person can cause a negative externality by_______.

The common-pool problem arises:

Open-access resources tend to be ______.

If education creates positive externalities, then:

Markets tend to underproduce goods that generate positive externalities.

The main objective of the Comprehensive Environmental Response, Compensation, and Liability Act, was to ensure that: