Question 1

Damage to the environment occurs because:

Accepted Answer

A) no one involved in markets cares about the environment. 
B) a nonzero amount of pollution is never socially optimal. 
C) pollution results from production of goods and services. 
D) pollution reduces the social cost of production. 
A) no one involved in markets cares about the environment. 
B) a nonzero amount of pollution is never socially optimal. 
C) pollution results from production of goods and services. 
D) pollution reduces the social cost of production.

Question 2

The marginal benefit of pollution emissions _____ as the quantity of pollution emissions _____.

Accepted Answer

A) decreases;increases 
B) increases;increases 
C) decreases;decreases 
D) remains unchanged;goes up or down 
A) decreases;increases 
B) increases;increases 
C) decreases;decreases 
D) remains unchanged;goes up or down

Question 3

Suppose that the production of roses generates a positive externality in that travelers enjoy the scenic beauty of the garden.An appropriate government policy yielding the efficient outcome would be a:

Accepted Answer

A) Pigouvian tax. 
B) Pigouvian subsidy. 
C) system of rose-production permits. 
D) reduction in transaction costs. 
A) Pigouvian tax. 
B) Pigouvian subsidy. 
C) system of rose-production permits. 
D) reduction in transaction costs.

Question 4

Use the following to answer question:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _____ and a quantity of _____.

Accepted Answer

A) $5;40 
B) $15;30 
C) $25;30 
D) $15;15 
A) $5;40 
B) $15;30 
C) $25;30 
D) $15;15

Question 5

Use the following to answer question:  
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced:

Accepted Answer

A) too much pollution is produced. 
B) the efficient amount of pollution is produced. 
C) not enough pollution is produced. 
D) the socially optimum amount of pollution is produced. 
A) too much pollution is produced. 
B) the efficient amount of pollution is produced. 
C) not enough pollution is produced. 
D) the socially optimum amount of pollution is produced.

Question 6

The most economically efficient way to reduce pollution is to impose strict environmental standards on all polluters.

Accepted Answer

A) True 
 B)False

Question 7

Laws that require vehicles to have catalytic converters or that restrict or prohibit leaf burning are:

Accepted Answer

A) Pigouvian taxes. 
B) internalization of externalities. 
C) transaction costs. 
D) environmental standards. 
A) Pigouvian taxes. 
B) internalization of externalities. 
C) transaction costs. 
D) environmental standards.

Question 8

Use the following to answer question:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _____ and the quantity is _____.

Accepted Answer

A) $5;15 
B) $5;40 
C) $25;20 
D) $5;30 
A) $5;15 
B) $5;40 
C) $25;20 
D) $5;30

Question 9

Use the following to answer question:
Figure: City with Two Polluters  
-(Figure: City with Two Polluters)Use Figure: City with Two Polluters.If the government imposed an emissions tax of $400,firm A would produce _____ tons of pollution and firm B would produce _____ tons of pollution.

Accepted Answer

A) 200;400 
B) 400;1,200 
C) 800;1,400 
D) 1,200;1,600 
A) 200;400 
B) 400;1,200 
C) 800;1,400 
D) 1,200;1,600

Question 10

(Figure: The Optimal Quantity of Pollution)Use Figure: The Optimal Quantity of Pollution.The figure shows the marginal social cost (MSC)and marginal social benefit (MSB)for firms that pollute the air with sulfur dioxide.Using the figure,the optimal Pigouvian tax per unit of pollution is: Figure: The Optimal Quantity of Pollution

Accepted Answer

A) $500. 
B) $250. 
C) $167. 
D) $83. 
A) $500. 
B) $250. 
C) $167. 
D) $83.

Question 11

Assume that the federal government determines the total level of pollutants that can be discharged by city industries.A city is able to buy and sell the rights to this total discharge level with other cities.This example illustrates a(n):

Accepted Answer

A) emissions tax. 
B) Pigouvian tax. 
C) tradable emissions permit. 
D) environmental standard. 
A) emissions tax. 
B) Pigouvian tax. 
C) tradable emissions permit. 
D) environmental standard.

Question 12

Which statement describes a positive externality?

Accepted Answer

A) Sam dug a pond,so he could go fishing,but the pond has contributed to an explosion of mosquitoes in your neighborhood. 
B) Sam has dozens of cats,and they come into your yard to hunt the birds that come to your birdbath. 
C) Sam buys a dilapidated house,renovates it,and increases the property values of all the houses in the neighborhood. 
D) Liquid waste from Sam's chicken farm flows into a neighbor's well water. 
A) Sam dug a pond,so he could go fishing,but the pond has contributed to an explosion of mosquitoes in your neighborhood. 
B) Sam has dozens of cats,and they come into your yard to hunt the birds that come to your birdbath. 
C) Sam buys a dilapidated house,renovates it,and increases the property values of all the houses in the neighborhood. 
D) Liquid waste from Sam's chicken farm flows into a neighbor's well water.

Question 13

Use the following to answer question:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

Accepted Answer

A) 40;MSB = MSC 
B) 30;MSB < MSC 
C) 40;MSB < MSC 
D) 30;MSC < MSB 
A) 40;MSB = MSC 
B) 30;MSB < MSC 
C) 40;MSB < MSC 
D) 30;MSC < MSB

Question 14

The marginal social cost of pollution emissions _____ as the quantity of pollution emissions _____.

Accepted Answer

A) decreases;increases 
B) increases;increases 
C) increases;decreases 
D) remains constant;decreases 
A) decreases;increases 
B) increases;increases 
C) increases;decreases 
D) remains constant;decreases

Question 15

Use the following to answer question:  
-(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 2 tons of pollution is produced,the outcome is _____ because _____.

Accepted Answer

A) efficient;MSB = MSC B) efficient;MSB > MSC C) inefficient;MSB > MSC D) inefficient;MSB < MSC A) efficient;MSB = MSC B) efficient;MSB > MSC C) inefficient;MSB > MSC D) inefficient;MSB < MSC

Question 16

An externality is said to be internalized:

Accepted Answer

A) when individuals take external costs and benefits into account in their decision making. 
B) when the Coase theorem is irrelevant or cannot be applied. 
C) when individuals successfully petition the government to ban or restrict activities that generate negative externalities. 
D) when individuals learn to adapt to negative externalities through introspection or internal acceptance of what are viewed as unchangeable facts of life. 
A) when individuals take external costs and benefits into account in their decision making. 
B) when the Coase theorem is irrelevant or cannot be applied. 
C) when individuals successfully petition the government to ban or restrict activities that generate negative externalities. 
D) when individuals learn to adapt to negative externalities through introspection or internal acceptance of what are viewed as unchangeable facts of life.

Question 17

The marginal social benefit from pollution _____ as the quantity of pollution emissions _____.

Accepted Answer

A) remains constant;increases 
B) increases;decreases 
C) increases;increases 
D) remains constant;decreases 
A) remains constant;increases 
B) increases;decreases 
C) increases;increases 
D) remains constant;decreases

Question 18

Use the following to answer question:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

Accepted Answer

A) A 
B) B 
C) E 
D) F 
A) A 
B) B 
C) E 
D) F

Question 19

Use the following to answer question:
Figure: MSB and MSC of Pollution  
-(Figure: MSB and MSC of Pollution)Use Figure: MSB and MSC of Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.What level of pollution would be emitted in a market economy without government regulation?

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Q4 
A) Q1 
B) Q2 
C) Q3 
D) Q4

Question 20

Suppose an emissions tax is imposed on all dairy farms in Wisconsin.This tax would:

Accepted Answer

A) encourage the dairy farmers to lower prices. 
B) increase the level of emissions. 
C) reduce the supply of milk in Wisconsin. 
D) increase the supply of milk in Wisconsin. 
A) encourage the dairy farmers to lower prices. 
B) increase the level of emissions. 
C) reduce the supply of milk in Wisconsin. 
D) increase the supply of milk in Wisconsin.

Damage to the environment occurs because:

The marginal benefit of pollution emissions _ as the quantity of pollution emissions _.

Suppose that the production of roses generates a positive externality in that travelers enjoy the scenic beauty of the garden.An appropriate government policy yielding the efficient outcome would be a:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _ and a quantity of _.

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced:

The most economically efficient way to reduce pollution is to impose strict environmental standards on all polluters.

Laws that require vehicles to have catalytic converters or that restrict or prohibit leaf burning are:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _ and the quantity is _.

Use the following to answer question: Figure: City with Two Polluters -(Figure: City with Two Polluters)Use Figure: City with Two Polluters.If the government imposed an emissions tax of $400,firm A would produce _ tons of pollution and firm B would produce _ tons of pollution.

Assume that the federal government determines the total level of pollutants that can be discharged by city industries.A city is able to buy and sell the rights to this total discharge level with other cities.This example illustrates a(n):

Which statement describes a positive externality?

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.

The marginal social cost of pollution emissions _ as the quantity of pollution emissions _.

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 2 tons of pollution is produced,the outcome is _ because _.

An externality is said to be internalized:

The marginal social benefit from pollution _ as the quantity of pollution emissions _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

Suppose an emissions tax is imposed on all dairy farms in Wisconsin.This tax would:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 16: Externalities

Damage to the environment occurs because:

The marginal benefit of pollution emissions _____ as the quantity of pollution emissions _____.

Suppose that the production of roses generates a positive externality in that travelers enjoy the scenic beauty of the garden.An appropriate government policy yielding the efficient outcome would be a:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _____ and a quantity of _____.

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced:

The most economically efficient way to reduce pollution is to impose strict environmental standards on all polluters.

Laws that require vehicles to have catalytic converters or that restrict or prohibit leaf burning are:

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _____ and the quantity is _____.

Use the following to answer question: Figure: City with Two Polluters -(Figure: City with Two Polluters)Use Figure: City with Two Polluters.If the government imposed an emissions tax of $400,firm A would produce _____ tons of pollution and firm B would produce _____ tons of pollution.

Assume that the federal government determines the total level of pollutants that can be discharged by city industries.A city is able to buy and sell the rights to this total discharge level with other cities.This example illustrates a(n):

Which statement describes a positive externality?

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _____ units of emissions are produced,then _____.

The marginal social cost of pollution emissions _____ as the quantity of pollution emissions _____.

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 2 tons of pollution is produced,the outcome is _____ because _____.

An externality is said to be internalized:

The marginal social benefit from pollution _____ as the quantity of pollution emissions _____.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.Point _____ in the figure represents an efficient solution in this market,where sulfur emissions are a result of production.

Suppose an emissions tax is imposed on all dairy farms in Wisconsin.This tax would:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

The marginal benefit of pollution emissions _ as the quantity of pollution emissions _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,whose sulfur emissions are a result of production,an efficient solution takes place at a price of _ and a quantity of _.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,too much pollution is found when the price is _ and the quantity is _.

Use the following to answer question: Figure: City with Two Polluters -(Figure: City with Two Polluters)Use Figure: City with Two Polluters.If the government imposed an emissions tax of $400,firm A would produce _ tons of pollution and firm B would produce _ tons of pollution.

Use the following to answer question: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency)Use Figure: Pollution and Efficiency.In this market,in which sulfur emissions are a result of production,if _ units of emissions are produced,then _.

The marginal social cost of pollution emissions _ as the quantity of pollution emissions _.

Use the following to answer question: -(Table: Coal Mine Pollution)Use Table: Coal Mine Pollution.The table shows the marginal social benefit and cost of various amounts of pollution from a coal mine.If 2 tons of pollution is produced,the outcome is _ because _.

The marginal social benefit from pollution _ as the quantity of pollution emissions _.