Question 1

When external costs exist,

Accepted Answer

A) There is government failure. 
B) Market prices do not convey the full costs of production. 
C) The market achieves the optimal mix of output. 
D) Private costs are greater than social costs. 
A) There is government failure. 
B) Market prices do not convey the full costs of production. 
C) The market achieves the optimal mix of output. 
D) Private costs are greater than social costs.

Question 2

A polluting company can be billed in proportion to its pollution through

Accepted Answer

A) Higher user fees. 
B) Emission charges. 
C) Privatization. 
D) Tradable pollution permits. 
A) Higher user fees. 
B) Emission charges. 
C) Privatization. 
D) Tradable pollution permits.

Question 3

When the government requires specific processes for reducing pollution,it is using

Accepted Answer

A) A command-and-control approach. 
B) Green taxes. 
C) A tradable permit program. 
D) A user fee plan. 
A) A command-and-control approach. 
B) Green taxes. 
C) A tradable permit program. 
D) A user fee plan.

Question 4

An external cost is borne by

Accepted Answer

A) The producer of the good. 
B) The consumers of the good. 
C) A third party to the market transaction. 
D) Employees of the firm that produces the good. 
A) The producer of the good. 
B) The consumers of the good. 
C) A third party to the market transaction. 
D) Employees of the firm that produces the good.

Question 5

Which of the following is not a form of air pollution?

Accepted Answer

A) Acid rain. 
B) Smog. 
C) The greenhouse effect. 
D) Thermal pollution. 
A) Acid rain. 
B) Smog. 
C) The greenhouse effect. 
D) Thermal pollution.

Question 6

By altering market incentives,the government tries to shift

Accepted Answer

A) External costs to society. 
B) External costs to the producer. 
C) Private costs to society. 
D) Social costs to the producer. 
A) External costs to society. 
B) External costs to the producer. 
C) Private costs to society. 
D) Social costs to the producer.

Question 7

When the government requires a firm to pay an emission charge in proportion to its pollution,

Accepted Answer

A) Both average total costs and marginal costs rise. 
B) Average total costs rise,but marginal costs do not. 
C) Marginal costs rise,but average total costs do not. 
D) Neither marginal costs nor average total costs are affected. 
A) Both average total costs and marginal costs rise. 
B) Average total costs rise,but marginal costs do not. 
C) Marginal costs rise,but average total costs do not. 
D) Neither marginal costs nor average total costs are affected.

Question 8

Government intervention that fails to improve economic outcomes is known as

Accepted Answer

A) Social failure. 
B) Government failure. 
C) Market failure. 
D) Public policy. 
A) Social failure. 
B) Government failure. 
C) Market failure. 
D) Public policy.

Question 9

The principal advantage of pollution permits is their incentive to minimize the cost of pollution control.

Accepted Answer

A) True 
 B)False

Question 10

If a firm adopts a production process that is costly in order to reduce pollution,the result is

Accepted Answer

A) A decrease in the firm's MC curve and a decrease in the firm's profits. 
B) An increase in the firm's ATC curve and an increase in the firm's profits. 
C) A decrease in the profit-maximizing rate of output and a decrease in the firm's profits. 
D) A decrease in the firm's ATC curve and an increase in the firm's profits. 
A) A decrease in the firm's MC curve and a decrease in the firm's profits. 
B) An increase in the firm's ATC curve and an increase in the firm's profits. 
C) A decrease in the profit-maximizing rate of output and a decrease in the firm's profits. 
D) A decrease in the firm's ATC curve and an increase in the firm's profits.

Question 11

In cost-benefit analysis,the government should intervene in environmental affairs as long as

Accepted Answer

A) The government corrects market failures without government cost. 
B) The value of government failure exceeds the value of market failure. 
C) The improvement in the environment exceeds the costs. 
D) The government corrects market failures despite government failure. 
A) The government corrects market failures without government cost. 
B) The value of government failure exceeds the value of market failure. 
C) The improvement in the environment exceeds the costs. 
D) The government corrects market failures despite government failure.

Question 12

The Clean Air Acts of 1970 and 1990 used command-and-control regulatory standards to reduce air pollution.

Accepted Answer

A) True 
 B)False

Question 13

Table 28.1 $\begin{array}{|c|r|r|}
\hline  \begin{array}{c}
\text { Reduction in Emissions } \
\text { (in tons) }
\end{array} & \begin{array}{c}
\text { MC to Reduce Emissions by } \
\text { SteelPlant }
\end{array} & \begin{array}{c}
\text { MC to Reduce Emissions by } \
\text { Paper Plant }
\end{array} \
\hline 1 & \$ 400 & \$ 200 \
\hline 2 & 500 & 280 \
\hline 3 & 600 & 320 \
\hline
\end{array}$ Refer to Table 28.1.Suppose the government commands each firm to reduce its emissions by one ton each.What is the total cost?

Accepted Answer

A) $600. 
B) $780. 
C) $920. 
D) $400. 
A) $600. 
B) $780. 
C) $920. 
D) $400.

Question 14

A primary purpose of tradable pollution permits is to

Accepted Answer

A) Increase the level of pollution to optimal levels. 
B) Reduce the cost of pollution control. 
C) Eliminate private costs. 
D) Completely eliminate pollution. 
A) Increase the level of pollution to optimal levels. 
B) Reduce the cost of pollution control. 
C) Eliminate private costs. 
D) Completely eliminate pollution.

Question 15

The greenhouse effect represents an external cost.

Accepted Answer

A) True 
 B)False

Question 16

An emission charge

Accepted Answer

A) Reduces private marginal cost and reduces output. 
B) Reduces private marginal cost and increases output. 
C) Increases private marginal cost and reduces output. 
D) Increases private marginal cost and increases output. 
A) Reduces private marginal cost and reduces output. 
B) Reduces private marginal cost and increases output. 
C) Increases private marginal cost and reduces output. 
D) Increases private marginal cost and increases output.

Question 17

The command-and-control approach to pollution reduction

Accepted Answer

A) May be less efficient than a market-based option. 
B) Lowers private marginal costs. 
C) Lowers market prices. 
D) Stimulates production. 
A) May be less efficient than a market-based option. 
B) Lowers private marginal costs. 
C) Lowers market prices. 
D) Stimulates production.

Question 18

Producers can be encouraged to internalize external costs by having the government

Accepted Answer

A) Impose emission charges but not pollution fines. 
B) Reduce user fees. 
C) Alter market incentives but not through regulatory intervention. 
D) Impose pollution fines or higher user fees. 
A) Impose emission charges but not pollution fines. 
B) Reduce user fees. 
C) Alter market incentives but not through regulatory intervention. 
D) Impose pollution fines or higher user fees.

Question 19

When private and social costs are equal,

Accepted Answer

A) Market failure occurs. 
B) There are no external costs. 
C) Government failure occurs. 
D) There is no opportunity cost. 
A) Market failure occurs. 
B) There are no external costs. 
C) Government failure occurs. 
D) There is no opportunity cost.

Question 20

The optimal rate of pollution occurs where

Accepted Answer

A) MR = MC for the production of the good that produces pollution. 
B) The marginal benefit equals the marginal cost of pollution abatement. 
C) The marginal benefit of pollution abatement is zero. 
D) Pollution is reduced to zero. 
A) MR = MC for the production of the good that produces pollution. 
B) The marginal benefit equals the marginal cost of pollution abatement. 
C) The marginal benefit of pollution abatement is zero. 
D) Pollution is reduced to zero.

Exam 28: Environmental Protection

When external costs exist,

A polluting company can be billed in proportion to its pollution through

When the government requires specific processes for reducing pollution,it is using

An external cost is borne by

Which of the following is not a form of air pollution?

By altering market incentives,the government tries to shift

When the government requires a firm to pay an emission charge in proportion to its pollution,

Government intervention that fails to improve economic outcomes is known as

The principal advantage of pollution permits is their incentive to minimize the cost of pollution control.

If a firm adopts a production process that is costly in order to reduce pollution,the result is

In cost-benefit analysis,the government should intervene in environmental affairs as long as

The Clean Air Acts of 1970 and 1990 used command-and-control regulatory standards to reduce air pollution.

Table 28.1 Reduction in Emissions (in tons) MC to Reduce Emissions by SteelPlant MC to Reduce Emissions by Paper Plant 1 \ 400 \ 200 2 500 280 3 600 320 Refer to Table 28.1.Suppose the government commands each firm to reduce its emissions by one ton each.What is the total cost?

A primary purpose of tradable pollution permits is to

The greenhouse effect represents an external cost.

An emission charge

The command-and-control approach to pollution reduction

Producers can be encouraged to internalize external costs by having the government

When private and social costs are equal,

The optimal rate of pollution occurs where

Economics: the Core Issues

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