Question 1

If the number of available tradable emissions permits is decreased,the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____.

Accepted Answer

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

Question 2

Which statement is CORRECT?

Accepted Answer

A) An emissions tax is a more efficient way to reduce pollution than is an environmental standard because an emissions tax equalizes the marginal benefit of pollution from all sources. 
B) An environmental standard is a more efficient way to reduce pollution than is an emissions tax because an environmental standard can be structured to equalize the reduction in pollution from all sources. 
C) If an emissions tax and environmental standards lead to the same total reduction in pollution,then they will also lead to the same reduction in pollution by individual polluters. 
D) It is easy to set emissions taxes at the "correct" level since the relationship between emissions taxes and the reduction in emissions that they induce has been extensively studied and is well known. 
A) An emissions tax is a more efficient way to reduce pollution than is an environmental standard because an emissions tax equalizes the marginal benefit of pollution from all sources. 
B) An environmental standard is a more efficient way to reduce pollution than is an emissions tax because an environmental standard can be structured to equalize the reduction in pollution from all sources. 
C) If an emissions tax and environmental standards lead to the same total reduction in pollution,then they will also lead to the same reduction in pollution by individual polluters. 
D) It is easy to set emissions taxes at the "correct" level since the relationship between emissions taxes and the reduction in emissions that they induce has been extensively studied and is well known.

Question 3

The efficient level of pollution is the quantity at which:

Accepted Answer

A) its total benefits exceed its total costs to society by the greatest possible amount. 
B) its total benefits to society equal its total costs to society. 
C) the marginal social benefit of an additional unit of pollution is greater than the marginal social cost of the additional unit. 
D) the marginal social benefit of an additional unit of pollution is less than the marginal social cost of the additional unit. 
A) its total benefits exceed its total costs to society by the greatest possible amount. 
B) its total benefits to society equal its total costs to society. 
C) the marginal social benefit of an additional unit of pollution is greater than the marginal social cost of the additional unit. 
D) the marginal social benefit of an additional unit of pollution is less than the marginal social cost of the additional unit.

Question 4

Use the following to answer question:  
-(Table: Externalities from Parks)Use: Table: Externalities from Parks.The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.Suppose that parks result in positive benefits to the community as a whole but that the marginal private benefit that any one individual in the community gets from parks is close to 0.If 5 acres are dedicated to the park,the park is _____ from a social perspective.

Accepted Answer

A) too large 
B) the socially optimum size 
C) too small 
D) the efficient size 
A) too large 
B) the socially optimum size 
C) too small 
D) the efficient size

Question 5

Which example BEST describes tradable emissions permits?

Accepted Answer

A) a tax system for internalizing emission costs to the market 
B) a subsidy system for encouraging production of goods with positive externalities 
C) a system of voluntary negotiations between polluters and damaged parties 
D) a system of licenses that can be bought and sold and that enable the holder to pollute up to a specified amount during a given period 
A) a tax system for internalizing emission costs to the market 
B) a subsidy system for encouraging production of goods with positive externalities 
C) a system of voluntary negotiations between polluters and damaged parties 
D) a system of licenses that can be bought and sold and that enable the holder to pollute up to a specified amount during a given period

Question 6

Use the following to answer question:
Figure: Efficiency and Pollution  
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.If the government imposed an environmental standard that did NOT allow the quantity of pollution to exceed 40 tons,there would be:

Accepted Answer

A) a socially optimal quantity of pollution. 
B) too little pollution because its marginal social benefit would exceed its marginal social cost. 
C) too much pollution because its marginal social cost would exceed its marginal social benefit. 
D) too much pollution because any pollution is too much from an economist's perspective. 
A) a socially optimal quantity of pollution. 
B) too little pollution because its marginal social benefit would exceed its marginal social cost. 
C) too much pollution because its marginal social cost would exceed its marginal social benefit. 
D) too much pollution because any pollution is too much from an economist's perspective.

Question 7

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 marginal social benefit is _____,and the marginal social cost is _____.

Accepted Answer

A) $0;$800 
B) $300;$500 
C) $400;$400 
D) $800;$0 
A) $0;$800 
B) $300;$500 
C) $400;$400 
D) $800;$0

Question 8

The marginal social benefit received from pollution is less than its marginal social cost in the market for highly polished glass.In this situation:

Accepted Answer

A) firms in the market produce the socially optimal level of pollution. 
B) society's well-being cannot be improved by changing the quantity of pollution. 
C) firms in the market produce too much pollution. 
D) firms in the market produce too little pollution. 
A) firms in the market produce the socially optimal level of pollution. 
B) society's well-being cannot be improved by changing the quantity of pollution. 
C) firms in the market produce too much pollution. 
D) firms in the market produce too little pollution.

Question 9

An example that does NOT illustrate an external cost is:

Accepted Answer

A) the smoke nuisance of a factory. 
B) zoning restrictions on your property. 
C) land defilement from strip mining. 
D) a spreading patch of weeds on your next-door neighbor's lawn. 
A) the smoke nuisance of a factory. 
B) zoning restrictions on your property. 
C) land defilement from strip mining. 
D) a spreading patch of weeds on your next-door neighbor's lawn.

Question 10

Use the following to answer question:
Figure: Efficiency and Pollution  
-(Figure: Efficiency and Pollution)Use Figure: Efficiency and Pollution.Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society.In the absence of government intervention,the marginal social cost of pollution will equal _____,and the marginal social benefit of pollution will equal _____.

Accepted Answer

A) $25;$5 
B) $5;$25 
C) $15;$15 
D) $25;$0 
A) $25;$5 
B) $5;$25 
C) $15;$15 
D) $25;$0

Question 11

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee,assuming that the government does not intervene in the marketplace.

Accepted Answer

A) True 
 B)False

Question 12

The efficient rate of emissions occurs when:

Accepted Answer

A) there is absolutely no damage done to a pristine environment. 
B) government forbid s all pollution,no matter what the cost. 
C) the marginal social benefits of pollution exceed the marginal social costs of pollution. 
D) the change in social benefits and the change in social costs from an additional unit of emissions are equal. 
A) there is absolutely no damage done to a pristine environment. 
B) government forbid s all pollution,no matter what the cost. 
C) the marginal social benefits of pollution exceed the marginal social costs of pollution. 
D) the change in social benefits and the change in social costs from an additional unit of emissions are equal.

Question 13

If government officials set an emissions tax too high:

Accepted Answer

A) there will be too little pollution. 
B) there will be too much pollution. 
C) the marginal social cost of pollution will exceed the marginal social benefit of pollution. 
D) pollution will be unabated. 
A) there will be too little pollution. 
B) there will be too much pollution. 
C) the marginal social cost of pollution will exceed the marginal social benefit of pollution. 
D) pollution will be unabated.

Question 14

Which example illustrates an environmental policy based on tradable emission permits?

Accepted Answer

A) a charge to companies of $1 for every 100 units of pollutants emitted 
B) paying companies $1 for each 10% reduction in emissions 
C) allowing companies to buy and sell the right to a certain level of emissions 
D) ignoring pollution and letting private markets operate without government interference 
A) a charge to companies of $1 for every 100 units of pollutants emitted 
B) paying companies $1 for each 10% reduction in emissions 
C) allowing companies to buy and sell the right to a certain level of emissions 
D) ignoring pollution and letting private markets operate without government interference

Question 15

Automobile emissions generate pollution,have health costs for pedestrians,and cause discomfort to residents of a city.In this case:

Accepted Answer

A) too little of society's resources are being used to operate automobiles. 
B) the externality can be internalized by imposing a specific tax on drivers. 
C) there is an external benefit to society from operating automobiles. 
D) the externality can be internalized by granting a specific subsidy to drivers. 
A) too little of society's resources are being used to operate automobiles. 
B) the externality can be internalized by imposing a specific tax on drivers. 
C) there is an external benefit to society from operating automobiles. 
D) the externality can be internalized by granting a specific subsidy to drivers.

Question 16

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 wants to limit total pollution to 2,200 tons,it could impose an emissions tax of _____ on both firms.

Accepted Answer

A) $100 
B) $200 
C) $300 
D) $400 
A) $100 
B) $200 
C) $300 
D) $400

Question 17

Pigouvian taxes:

Accepted Answer

A) tax the profits of polluting firms. 
B) are designed to reduce external costs. 
C) are essentially the same as emissions standards. 
D) are tradable emissions permits. 
A) tax the profits of polluting firms. 
B) are designed to reduce external costs. 
C) are essentially the same as emissions standards. 
D) are tradable emissions permits.

Question 18

Use the following to answer question:
Figure: Model of a Competitive Market  
-(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if a tax is imposed on sellers,the equilibrium price will _____ and the equilibrium quantity will _____.

Accepted Answer

A) increase;decrease 
B) remain the same;increase 
C) remain the same;decrease 
D) increase;increase 
A) increase;decrease 
B) remain the same;increase 
C) remain the same;decrease 
D) increase;increase

Question 19

Which example is a good or market activity that is associated with a positive externality?

Accepted Answer

A) smoking cigarettes 
B) listening to a new CD with earbuds 
C) innovation in the semiconductor industry 
D) an indoor classical music concert with tickets that cost $50 
A) smoking cigarettes 
B) listening to a new CD with earbuds 
C) innovation in the semiconductor industry 
D) an indoor classical music concert with tickets that cost $50

Question 20

According to the Coase theorem,when negative externalities are present,a market will:

Accepted Answer

A) always reach an efficient solution. 
B) reach an efficient solution if transaction costs are low and property rights are well-defined. 
C) reach an efficient solution only if the government intervenes in the market with a tax. 
D) reach an efficient solution only if the negative externalities are offset by positive externalities. 
A) always reach an efficient solution. 
B) reach an efficient solution if transaction costs are low and property rights are well-defined. 
C) reach an efficient solution only if the government intervenes in the market with a tax. 
D) reach an efficient solution only if the negative externalities are offset by positive externalities.

If the number of available tradable emissions permits is decreased,the equilibrium price of the permits _ and the equilibrium quantity of emissions _.

Which statement is CORRECT?

The efficient level of pollution is the quantity at which:

Which example BEST describes tradable emissions permits?

The marginal social benefit received from pollution is less than its marginal social cost in the market for highly polished glass.In this situation:

An example that does NOT illustrate an external cost is:

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee,assuming that the government does not intervene in the marketplace.

The efficient rate of emissions occurs when:

If government officials set an emissions tax too high:

Which example illustrates an environmental policy based on tradable emission permits?

Automobile emissions generate pollution,have health costs for pedestrians,and cause discomfort to residents of a city.In this case:

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 wants to limit total pollution to 2,200 tons,it could impose an emissions tax of _____ on both firms.

Pigouvian taxes:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if a tax is imposed on sellers,the equilibrium price will _ and the equilibrium quantity will _.

Which example is a good or market activity that is associated with a positive externality?

According to the Coase theorem,when negative externalities are present,a market will:

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

If the number of available tradable emissions permits is decreased,the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____.

Which statement is CORRECT?

The efficient level of pollution is the quantity at which:

Which example BEST describes tradable emissions permits?

The marginal social benefit received from pollution is less than its marginal social cost in the market for highly polished glass.In this situation:

An example that does NOT illustrate an external cost is:

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee,assuming that the government does not intervene in the marketplace.

The efficient rate of emissions occurs when:

If government officials set an emissions tax too high:

Which example illustrates an environmental policy based on tradable emission permits?

Automobile emissions generate pollution,have health costs for pedestrians,and cause discomfort to residents of a city.In this case:

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 wants to limit total pollution to 2,200 tons,it could impose an emissions tax of _____ on both firms.

Pigouvian taxes:

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if a tax is imposed on sellers,the equilibrium price will _____ and the equilibrium quantity will _____.

Which example is a good or market activity that is associated with a positive externality?

According to the Coase theorem,when negative externalities are present,a market will:

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

If the number of available tradable emissions permits is decreased,the equilibrium price of the permits _ and the equilibrium quantity of emissions _.

Use the following to answer question: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market)Use Figure: Model of a Competitive Market.Given the figure,if a tax is imposed on sellers,the equilibrium price will _ and the equilibrium quantity will _.