Question 1

Exhibit 17-9   In Exhibit 17-9, the welfare loss (from society's perspective)that results from 6 units of water quality is shown by area

Accepted Answer

A) $5, 000 
B) $10, 000 
C) $15, 000 
D) $20, 000 
E) $25, 000 
A) $5, 000 
B) $10, 000 
C) $15, 000 
D) $20, 000 
E) $25, 000

Question 2

Exhibit 17-4   Which of the following could not have caused the increase in demand indicated in Exhibit 17-4?

Accepted Answer

A) new firms located on the river 
B) the pollution was discovered to be more hazardous than had previously been supposed 
C) the cost of pollution abatement equipment rose 
D) consumers wanted to buy more of the good produced by the polluters 
E) the government subsidized firms so they could better afford to buy pollution rights 
A) new firms located on the river 
B) the pollution was discovered to be more hazardous than had previously been supposed 
C) the cost of pollution abatement equipment rose 
D) consumers wanted to buy more of the good produced by the polluters 
E) the government subsidized firms so they could better afford to buy pollution rights

Question 3

A meditation class meets on the second floor of a building; the first floor is a nightclub.The loud music from the club disturbs the classes.The club could be soundproofed for a cost of $5, 000 or move at a cost of $8, 000.The class can't soundproof enough to overcome the music, but could be moved for $4, 000.According to Coase, a socially optimal solution can be achieved if

Accepted Answer

A) the local government purchases the building 
B) the building is torn down 
C) property rights to be noisy are granted to the nightclub 
D) property rights to a quiet environment are granted to the meditation class 
E) both the nightclub and the meditation class relocate 
A) the local government purchases the building 
B) the building is torn down 
C) property rights to be noisy are granted to the nightclub 
D) property rights to a quiet environment are granted to the meditation class 
E) both the nightclub and the meditation class relocate

Question 4

Some pollution occurs because property rights to some resources are well defined.

Accepted Answer

A) True 
 B)False

Question 5

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 
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 6

A tannery discovers a technology that makes it cheaper to reduce the air pollution it generates in making paper.On a graph of the optimal level of air quality, the use of the new technology would be represented by

Accepted Answer

A) a leftward shift of the marginal social cost curve 
B) a rightward shift of the marginal social cost curve 
C) movement to the right along the marginal social cost curve 
D) movement to the left along the marginal social cost curve 
E) a downward shift of the marginal net benefit curve 
A) a leftward shift of the marginal social cost curve 
B) a rightward shift of the marginal social cost curve 
C) movement to the right along the marginal social cost curve 
D) movement to the left along the marginal social cost curve 
E) a downward shift of the marginal net benefit curve

Question 7

All of the following are sources of negative externalities except one.Which is the exception?

Accepted Answer

A) a paper mill that pollutes a river 
B) a person who throws a beer can out the window of a moving car 
C) cars, which emit carbon monoxide 
D) a solar water heater which is outside and obscure from view 
E) products that contribute to the greenhouse effect 
A) a paper mill that pollutes a river 
B) a person who throws a beer can out the window of a moving car 
C) cars, which emit carbon monoxide 
D) a solar water heater which is outside and obscure from view 
E) products that contribute to the greenhouse effect

Question 8

Exhibit 17-1   If technology is fixed, the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Accepted Answer

A) subsidizing the production of the good by $10 per unit 
B) taxing the firm producing the good by $10 per unit 
C) using a quota system to encourage production of at least 160 units of the good 
D) using a quota system to restrict production of the good to no more than 160 units 
E) letting the private market operate freely to determine output at equilibrium 
A) subsidizing the production of the good by $10 per unit 
B) taxing the firm producing the good by $10 per unit 
C) using a quota system to encourage production of at least 160 units of the good 
D) using a quota system to restrict production of the good to no more than 160 units 
E) letting the private market operate freely to determine output at equilibrium

Question 9

If education creates positive externalities,

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 
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 10

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Air pollution is more dangerous to the public, but toxic waste generates more public uproar.Why?

Accepted Answer

A) Those exposed to the health hazard posed by the toxic waste site are usually less sure that exposure has occurred. 
B) Those exposed to the health hazard posed by the toxic waste site are usually more sure that exposure has occurred. 
C) Fewer people cause air pollution than toxic waste. 
D) Fewer people are affected by air pollution than by toxic waste. 
E) Toxic waste causes more illness and death than air pollution does. 
A) Those exposed to the health hazard posed by the toxic waste site are usually less sure that exposure has occurred. 
B) Those exposed to the health hazard posed by the toxic waste site are usually more sure that exposure has occurred. 
C) Fewer people cause air pollution than toxic waste. 
D) Fewer people are affected by air pollution than by toxic waste. 
E) Toxic waste causes more illness and death than air pollution does.

Question 13

Exhibit 17-6   In Exhibit 17-6, an unregulated market would produce

Accepted Answer

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

Question 14

Fishing, the lumber industry, tourism, and even city buildings in Canada are harmed by acid rain, most of which comes from the United States.According to the Coase theorem, the problem is

Accepted Answer

A) easy to solve because the United States and Canada are geographically close 
B) easy to solve because the United States and Canada are allies 
C) easy to solve because international property rights are recognized among capitalist countries 
D) hard to solve because international negotiations are more costly than domestic ones 
E) hard to solve because Canadians have property rights to clean, nonacidic rain 
A) easy to solve because the United States and Canada are geographically close 
B) easy to solve because the United States and Canada are allies 
C) easy to solve because international property rights are recognized among capitalist countries 
D) hard to solve because international negotiations are more costly than domestic ones 
E) hard to solve because Canadians have property rights to clean, nonacidic rain

Question 15

Which of the following responses to a positive externality enhances society's welfare?

Accepted Answer

A) taxes 
B) subsidies 
C) effluent fees 
D) quotas 
E) a cut in funding 
A) taxes 
B) subsidies 
C) effluent fees 
D) quotas 
E) a cut in funding

Question 16

Which state manufactures the most toxic chemicals and has the worst toxic waste burden?

Accepted Answer

A) California 
B) Louisiana 
C) New York 
D) New Jersey 
E) West Virginia 
A) California 
B) Louisiana 
C) New York 
D) New Jersey 
E) West Virginia

Question 17

A metal-stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to nap.What would be the optimal solution to this problem?

Accepted Answer

A) The factory should move. 
B) The day care center should move. 
C) The factory should install sound insulation. 
D) The day care center should install sound insulation. 
E) We cannot determine the solution without more information. 
A) The factory should move. 
B) The day care center should move. 
C) The factory should install sound insulation. 
D) The day care center should install sound insulation. 
E) We cannot determine the solution without more information.

Question 18

According to the Coase theorem, in order to solve a negative externality problem efficiently,

Accepted Answer

A) the property right must be assigned to the party with the least-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) transaction costs must be high 
D) transaction costs must be low 
E) property rights must be determined by the courts 
A) the property right must be assigned to the party with the least-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) transaction costs must be high 
D) transaction costs must be low 
E) property rights must be determined by the courts

Question 19

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 20

The most likely reason why Los Angeles has so much smog is that residents

Accepted Answer

A) do not have strong, enforceable property rights to rapid transit 
B) do not have strong, enforceable property rights to clean air 
C) prefer dirty air to the inconvenience of rapid transit 
D) prefer dirty air to the inconvenience of carpools 
E) prefer dirty air to the inconvenience of eliminating smog 
A) do not have strong, enforceable property rights to rapid transit 
B) do not have strong, enforceable property rights to clean air 
C) prefer dirty air to the inconvenience of rapid transit 
D) prefer dirty air to the inconvenience of carpools 
E) prefer dirty air to the inconvenience of eliminating smog

Exam 17: Externalities and the Environment

Exhibit 17-9 In Exhibit 17-9, the welfare loss (from society's perspective)that results from 6 units of water quality is shown by area

Exhibit 17-4 Which of the following could not have caused the increase in demand indicated in Exhibit 17-4?

Some pollution occurs because property rights to some resources are well defined.

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

A tannery discovers a technology that makes it cheaper to reduce the air pollution it generates in making paper.On a graph of the optimal level of air quality, the use of the new technology would be represented by

All of the following are sources of negative externalities except one.Which is the exception?

Exhibit 17-1 If technology is fixed, the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

If education creates positive externalities,

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

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

Air pollution is more dangerous to the public, but toxic waste generates more public uproar.Why?

Exhibit 17-6 In Exhibit 17-6, an unregulated market would produce

Fishing, the lumber industry, tourism, and even city buildings in Canada are harmed by acid rain, most of which comes from the United States.According to the Coase theorem, the problem is

Which of the following responses to a positive externality enhances society's welfare?

Which state manufactures the most toxic chemicals and has the worst toxic waste burden?

A metal-stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to nap.What would be the optimal solution to this problem?

According to the Coase theorem, in order to solve a negative externality problem efficiently,

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

The most likely reason why Los Angeles has so much smog is that residents

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

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

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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