Question 1

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 2

Exhibit 17-3 
-In Exhibit 17-3,the optimal air quality level is

Accepted Answer

A) 0 
B) 40 
C) 50 
D) 70 
E) 100

Question 3

In the United States,what percentage of smog comes from manufacturing sites?

Accepted Answer

A) 5 percent 
B) 15 percent 
C) 25 percent 
D) 40 percent 
E) 80 percent

Question 4

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) people demand clean water at any price

Question 5

If farmers decide individually whether or not to vaccinate their cattle against mad cow disease,which of the following is true?

Accepted Answer

A) The equilibrium quantity is too low for efficiency. 
B) The equilibrium price and quantity are too high for efficiency. 
C) The equilibrium price is efficient. 
D) The equilibrium quantity is too high for efficiency. 
E) The equilibrium price and quantity are efficient.

Question 6

Which of the following is most likely to happen to open-access wildlife resources?

Accepted Answer

A) They will be used efficiently. 
B) They will not be used at all. 
C) It will be unprofitable to use them. 
D) They will be used but will generate no profit. 
E) They will become extinct.

Question 7

Unpriced by-products of production or consumption that impose costs on other consumers or firms are known as

Accepted Answer

A) negative externalities 
B) effluent fees 
C) pollution rights 
D) positive externalities 
E) moral hazards

Question 8

Oil is an example of a renewable resource.

Accepted Answer

A) True 
 B)False

Question 9

The Clean Air Act of 1970

Accepted Answer

A) set up a depletion tax system 
B) reduced air pollution standards 
C) recognized air as a resource 
D) established a system of transferable pollution rights 
E) forbade producers to emit any pollutants into the air

Question 10

Pollution and other negative externalities arise because

Accepted Answer

A) there are no enforceable property rights to open-access resources 
B) legislators cannot agree on what to do about them 
C) they are the price consumers are willing to pay for production of goods and services 
D) private property rights to pollute are controlled by businesses 
E) science cannot decide how to control them

Question 11

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

Question 12

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 13

The Coase solution to the problem of externalities

Accepted Answer

A) applies in every situation where externalities are present 
B) only applies to activities that generate positive externalities 
C) only works under perfect competition 
D) only works when bargaining costs are low 
E) can lead to an increase in the common pool problem

Question 14

As an example of how interrelated the global economy has become,the increased demand for biofuels to replace fossil fuels is a major driver of

Accepted Answer

A) oil exploration 
B) increased gasoline refinery capacity 
C) deforestation 
D) tariffs 
E) increased rainforest acreage

Question 15

If periodic use of a resource can be continued indefinitely,that resource is said to be

Accepted Answer

A) removable 
B) renewable 
C) cyclical 
D) recyclable 
E) part of a common pool

Question 16

According to the Coase theorem,externality problems may be solved if the parties involved can negotiate.Which of the following is also needed?

Accepted Answer

A) clearly defined bargaining costs 
B) enforceable bargaining costs 
C) clearly defined,enforceable property rights and low bargaining costs 
D) a property right that cannot be bought or sold 
E) government regulation

Question 17

A pollution tax

Accepted Answer

A) is itself a form of negative externality 
B) is a positive externality used to offset a negative one 
C) is a price per unit of discharge of pollution 
D) is a tax on pollution control equipment 
E) may cause a common pool problem

Question 18

A removal or depletion tax on an open-access resource increases the marginal private cost of using the resource by

Accepted Answer

A) zero 
B) the amount of the tax 
C) the marginal product of the resource 
D) the average private cost of using the resource 
E) the average social cost of using the resource

Question 19

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

Question 20

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