Question 1

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

Accepted Answer

A) True 
 B)False

Question 2

Table 16.1
-Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.The government in the area has created a set of pollution permits.Each permit allows a producer to dump 100 gallons of waste.If the government issues an equal number of pollution permits to each producer:

Accepted Answer

A) neither producer will want to sell its permits at a price of $300. 
B) Producer X will be more willing to sell its permits than will Producer Y. 
C) both producers would be willing to sell all permits at a price of $50. 
D) Producer Y will be more willing to sell its permits than will Producer X. 
A) neither producer will want to sell its permits at a price of $300. 
B) Producer X will be more willing to sell its permits than will Producer Y. 
C) both producers would be willing to sell all permits at a price of $50. 
D) Producer Y will be more willing to sell its permits than will Producer X.

Question 3

If a producer is imposing an external cost on society,the best response would be to:

Accepted Answer

A) lower the producer's taxes to offset pollution. 
B) increase the production. 
C) internalize the externality. 
D) subsidize the producer. 
A) lower the producer's taxes to offset pollution. 
B) increase the production. 
C) internalize the externality. 
D) subsidize the producer.

Question 4

Table 16.1
-Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.The marginal cost of reducing waste:

Accepted Answer

A) is equal for both producers. 
B) is higher for Producer Y. 
C) falls as the level of waste dumped falls. 
D) is higher for Producer X. 
A) is equal for both producers. 
B) is higher for Producer Y. 
C) falls as the level of waste dumped falls. 
D) is higher for Producer X.

Question 5

A tax on the likelihood of being in a collision will help internalize the external costs of collisions.

Accepted Answer

A) True 
 B)False

Question 6

One advantage of pollution permits over pollution taxes is:

Accepted Answer

A) pollution permits allow firms to choose their profit-maximizing level of pollution while taxes do not. 
B) pollution permits generate more revenue for the government than do pollution taxes. 
C) the government can set a maximum level of pollution using pollution permits. 
D) none of the above. 
A) pollution permits allow firms to choose their profit-maximizing level of pollution while taxes do not. 
B) pollution permits generate more revenue for the government than do pollution taxes. 
C) the government can set a maximum level of pollution using pollution permits. 
D) none of the above.

Question 7

Jason and Lauren live in the countryside 30 minutes from a main city in Virginia.They moved there because they wanted to enjoy the fresh air.After a year of living in their house,the 200 acres that surround their neighbor were zoned for an industrial property.A paper mill was built in the zoning and now emits strong gases that can be smelt from miles away,the paper mill's emission of gases are an example of a (an):

Accepted Answer

A) public good. 
B) good that imposes an external cost. 
C) good that provides an external benefit. 
D) efficient good. 
A) public good. 
B) good that imposes an external cost. 
C) good that provides an external benefit. 
D) efficient good.

Question 8

Which of the following is the regulation that the U.S.currently use to regulate automobile pollution?

Accepted Answer

A) uniform abatement 
B) diagnosis and treatment 
C) command and control 
D) marketable pollution permits 
A) uniform abatement 
B) diagnosis and treatment 
C) command and control 
D) marketable pollution permits

Question 9

When the government taxes a firm that generates an external cost,the profit maximizing firm will produce:

Accepted Answer

A) more units of output than before the tax was imposed. 
B) the same number of units of output as before the tax was imposed. 
C) fewer units of output than before the tax was imposed. 
D) either more or fewer units of output than before the tax was imposed. 
A) more units of output than before the tax was imposed. 
B) the same number of units of output as before the tax was imposed. 
C) fewer units of output than before the tax was imposed. 
D) either more or fewer units of output than before the tax was imposed.

Question 10

The primary source of smog-causing pollutants is:

Accepted Answer

A) power plants. 
B) automobiles. 
C) charcoal grills. 
D) airplanes. 
A) power plants. 
B) automobiles. 
C) charcoal grills. 
D) airplanes.

Question 11

A company earns $70,000 in profit if it is allowed to dump untreated waste in the river and only $40,000 in profit if it is forced to treat the waste before dumping it into the river.The local fishermen earn $35,000 in profit if the river is polluted and $55,000 in profit if the river is not polluted.The fishermen would be willing to pay the company up to ________ not to pollute the river,and the company would be willing to accept a minimum of ________ if it agrees not to pollute the river.

Accepted Answer

A) $15,000;$30,000 
B) $20,000;$30,000 
C) $30,000;$20,000 
D) $20,000;$5,000 
A) $15,000;$30,000 
B) $20,000;$30,000 
C) $30,000;$20,000 
D) $20,000;$5,000

Question 12

The Clean Air Act of 1990 established a system of marketable pollution permits for SO2.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an external cost generated by the use of automobiles?

Accepted Answer

A) Congested highways impose a time cost on travelers. 
B) motor-vehicle accidents 
C) air pollutants 
D) all of the above 
A) Congested highways impose a time cost on travelers. 
B) motor-vehicle accidents 
C) air pollutants 
D) all of the above

Question 14

Command-and-control policies mandate:

Accepted Answer

A) the use of a particular abatement control technology. 
B) the level of output that the firm can produce. 
C) the price that the firm can charge for its output. 
D) the level of output and the price the firm can charge for its output. 
A) the use of a particular abatement control technology. 
B) the level of output that the firm can produce. 
C) the price that the firm can charge for its output. 
D) the level of output and the price the firm can charge for its output.

Question 15

A command-and-control policy causes firms to use inefficient abatement technologies,so production costs will be higher than they would be under a pollution tax.

Accepted Answer

A) True 
 B)False

Question 16

What is the greatest difficulty associated with using a tax to correct for an external cost? Explain.

Accepted Answer

The biggest problem with using a tax to

Question 17

Comment on the following statement: "When an external cost is present,and a firm does not factor this cost into its decisions,the firm is likely to produce a level of output that is lower than the efficient level."

Accepted Answer

The statement is false.When an external

Question 18

Table 16.1
-Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.For Producer Y,the marginal cost of reducing waste from 500 gallons to 400 gallons is:

Accepted Answer

A) $800. 
B) $50. 
C) $100. 
D) $850. 
A) $800. 
B) $50. 
C) $100. 
D) $850.

Question 19

The ability of marketable pollution permits to efficiently lower the level of pollution is dependent on the initial allocation of the permits.

Accepted Answer

A) True 
 B)False

Question 20

Give an example of an external cost and explain why the outcome is inefficient.

Accepted Answer

Student responses will vary.The student'

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

If a producer is imposing an external cost on society,the best response would be to:

Table 16.1 -Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.The marginal cost of reducing waste:

A tax on the likelihood of being in a collision will help internalize the external costs of collisions.

One advantage of pollution permits over pollution taxes is:

Which of the following is the regulation that the U.S.currently use to regulate automobile pollution?

When the government taxes a firm that generates an external cost,the profit maximizing firm will produce:

The primary source of smog-causing pollutants is:

The Clean Air Act of 1990 established a system of marketable pollution permits for SO₂.

Which of the following is an external cost generated by the use of automobiles?

Command-and-control policies mandate:

A command-and-control policy causes firms to use inefficient abatement technologies,so production costs will be higher than they would be under a pollution tax.

What is the greatest difficulty associated with using a tax to correct for an external cost? Explain.

Comment on the following statement: "When an external cost is present,and a firm does not factor this cost into its decisions,the firm is likely to produce a level of output that is lower than the efficient level."

Table 16.1 -Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.For Producer Y,the marginal cost of reducing waste from 500 gallons to 400 gallons is:

The ability of marketable pollution permits to efficiently lower the level of pollution is dependent on the initial allocation of the permits.

Give an example of an external cost and explain why the outcome is inefficient.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 16: External Costs and Environmental Policy

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

If a producer is imposing an external cost on society,the best response would be to:

Table 16.1 -Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.The marginal cost of reducing waste:

A tax on the likelihood of being in a collision will help internalize the external costs of collisions.

One advantage of pollution permits over pollution taxes is:

Which of the following is the regulation that the U.S.currently use to regulate automobile pollution?

When the government taxes a firm that generates an external cost,the profit maximizing firm will produce:

The primary source of smog-causing pollutants is:

The Clean Air Act of 1990 established a system of marketable pollution permits for SO2.

Which of the following is an external cost generated by the use of automobiles?

Command-and-control policies mandate:

A command-and-control policy causes firms to use inefficient abatement technologies,so production costs will be higher than they would be under a pollution tax.

What is the greatest difficulty associated with using a tax to correct for an external cost? Explain.

Comment on the following statement: "When an external cost is present,and a firm does not factor this cost into its decisions,the firm is likely to produce a level of output that is lower than the efficient level."

Table 16.1 -Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.For Producer Y,the marginal cost of reducing waste from 500 gallons to 400 gallons is:

The ability of marketable pollution permits to efficiently lower the level of pollution is dependent on the initial allocation of the permits.

Give an example of an external cost and explain why the outcome is inefficient.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

The Clean Air Act of 1990 established a system of marketable pollution permits for SO₂.