Question 1

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

Accepted Answer

A)  Water pollution. 
B)  Your roommate going on a diet. 
C)  Second-hand smoke. 
D)  Loud conversation in the workplace. 
A)  Water pollution. 
B)  Your roommate going on a diet. 
C)  Second-hand smoke. 
D)  Loud conversation in the workplace. B

Question 2

Which of the following statements is true?

Accepted Answer

A)  Emissions-trading is trading that allows firms to buy and sell the right to pollute. 
B)  The Coase Theorem is the proposition that private markets can rarely ever achieve social efficiency. 
C)  The free-rider problem refers to those who ride on public transit systems without paying. 
D)  Government failure has never occurred in the United States. 
A)  Emissions-trading is trading that allows firms to buy and sell the right to pollute. 
B)  The Coase Theorem is the proposition that private markets can rarely ever achieve social efficiency. 
C)  The free-rider problem refers to those who ride on public transit systems without paying. 
D)  Government failure has never occurred in the United States. A

Question 3

Effluent taxes are the most common approach used to control pollutants in the United States.

Accepted Answer

A) True 
 B)False  False

Question 4

Government regulations that set an environmental goal and dictate how the goal will be achieved are called:

Accepted Answer

A)  effluent-offset regulations. 
B)  incentive-based regulations. 
C)  Coasian regulations. 
D)  command-and-control-regulations. 
A)  effluent-offset regulations. 
B)  incentive-based regulations. 
C)  Coasian regulations. 
D)  command-and-control-regulations.

Question 5

Exhibit 14-2 Cigarette smoking data
Jack enjoys smoking, while Jill fears that second-hand smoke will shorten her life. The following table shows the value Jack places on each cigarette he smokes, and the value Jill places on her shortened life. Use the table to answer the following question(s): $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { of cigarettes }
\end{array} & \begin{array} { c } 
\text { Total value to Jack } \
\text { of cigarettes }
\end{array} & \text { Days of life lost } & \begin{array} { c } 
\text { Total value to Jill } \
\text { of days lost }
\end{array} \
\hline 1 & \$ 50 & 1 & \$ 30 \
2 & 90 & 2 & 60 \
3 & 120 & 3 & 90 \
4 & 140 & 4 & 120 \
5 & 150 & 5 & 150 \
\hline
\end{array}$$
-As shown in Exhibit 14-2, if smokers have the right to smoke as many cigarettes as they wish, and non-smokers have the right to negotiate, how many cigarettes will Jack smoke?

Accepted Answer

A)  1. 
B)  3. 
C)  5. 
D)  more than 5. 
A)  1. 
B)  3. 
C)  5. 
D)  more than 5.

Question 6

According to most economists, reducing automobile emissions to zero would be:

Accepted Answer

A)  optimal. 
B)  inefficient. 
C)  beneficial. 
D)  impossible. 
A)  optimal. 
B)  inefficient. 
C)  beneficial. 
D)  impossible.

Question 7

The ozone layer:

Accepted Answer

A)  protects us from ultraviolet rays which can cause cancer and blindness. 
B)  has been damaged as a result of the Montreal Protocol. 
C)  has been damaged as a result of the ban on CFCs. 
D)  is another term for the greenhouse effect. 
A)  protects us from ultraviolet rays which can cause cancer and blindness. 
B)  has been damaged as a result of the Montreal Protocol. 
C)  has been damaged as a result of the ban on CFCs. 
D)  is another term for the greenhouse effect.

Question 8

The Coase Theorem states that the private sector can achieve environmental efficiency, as long as property rights are clearly assigned.

Accepted Answer

A) True 
 B)False

Question 9

The socially efficient level of output is determined where:

Accepted Answer

A)  marginal social cost equals marginal social benefit. 
B)  marginal private cost equals marginal social benefit. 
C)  average social cost equals average social benefit. 
D)  average private cost equals average social benefit. 
A)  marginal social cost equals marginal social benefit. 
B)  marginal private cost equals marginal social benefit. 
C)  average social cost equals average social benefit. 
D)  average private cost equals average social benefit.

Question 10

The hot spot problem is:

Accepted Answer

A)  the U.S. obtains the majority of its oil supplies from politically unfriendly countries. 
B)  some air pollutants such as sulfur dioxide have a greater effect nearby than further away. 
C)  some air pollutants such as carbon dioxide have an equal effect nearby and further away. 
D)  nuclear plants heat up nearby water, causing a decline in the native fish population. 
A)  the U.S. obtains the majority of its oil supplies from politically unfriendly countries. 
B)  some air pollutants such as sulfur dioxide have a greater effect nearby than further away. 
C)  some air pollutants such as carbon dioxide have an equal effect nearby and further away. 
D)  nuclear plants heat up nearby water, causing a decline in the native fish population.

Question 11

Combating the "greenhouse effect" has classic free-rider problems.

Accepted Answer

A) True 
 B)False

Question 12

From society's point of view, the amount of air and water pollution that currently exists is excessive. Which of the following statements are explanations of this excessive pollution?

Accepted Answer

A)  Firms that cause air and water pollution are not paying the full social costs of producing their output. 
B)  Consumers, who purchase goods from firms that pollute, are not paying a price for these goods which totally reflect the social costs of producing the goods. 
C)  Private property rights for clear air and clean water are not currently well defined by the judicial system; hence private individuals cannot charge polluters for the external costs these polluters impose on private individuals. 
D)  All of these. 
A)  Firms that cause air and water pollution are not paying the full social costs of producing their output. 
B)  Consumers, who purchase goods from firms that pollute, are not paying a price for these goods which totally reflect the social costs of producing the goods. 
C)  Private property rights for clear air and clean water are not currently well defined by the judicial system; hence private individuals cannot charge polluters for the external costs these polluters impose on private individuals. 
D)  All of these.

Question 13

When using the traditional command-and-control approach to environmental regulation, the government attempts to:

Accepted Answer

A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement. 
B)  determine the most efficient method for different industries. 
C)  make allowances for differences across industries and between firms. 
D)  set standards that are applicable to all situations and does not recognize unique circumstances. 
A)  set a minimum requirement and then allows the firm to determine the most efficient method for achieving this requirement. 
B)  determine the most efficient method for different industries. 
C)  make allowances for differences across industries and between firms. 
D)  set standards that are applicable to all situations and does not recognize unique circumstances.

Question 14

At the market output and price for a good whose production causes pollution:

Accepted Answer

A)  pollution is eliminated. 
B)  the marginal social cost of production exceeds the marginal social benefit of production 
C)  the private cost of production equals the private benefit of production. 
D)  the marginal social benefit of production equals the marginal social cost of production. 
A)  pollution is eliminated. 
B)  the marginal social cost of production exceeds the marginal social benefit of production 
C)  the private cost of production equals the private benefit of production. 
D)  the marginal social benefit of production equals the marginal social cost of production.

Question 15

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

Accepted Answer

A)  social welfare is maximized. 
B)  the good is overproduced and the market is inefficient. 
C)  firms are earning zero profits. 
D)  all externalities have been eliminated. 
A)  social welfare is maximized. 
B)  the good is overproduced and the market is inefficient. 
C)  firms are earning zero profits. 
D)  all externalities have been eliminated.

Question 16

A pollution tax that is exactly equal to marginal external cost will shift the market supply curve to the social-cost supply curve. This tax will thus correct the market inefficiency due to negative externalities by causing price to reflect the full marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 17

Competitive firms consider private costs, but disregard external costs, when making their economic decisions.

Accepted Answer

A) True 
 B)False

Question 18

Incentive-based regulations tend to be more efficient than command-and-control regulations.

Accepted Answer

A) True 
 B)False

Question 19

If firms pollute when they produce:

Accepted Answer

A)  marginal social cost equals marginal private cost. 
B)  marginal private cost exceeds marginal social cost. 
C)  marginal social cost exceeds marginal private cost. 
D)  marginal social cost equals marginal external cost. 
A)  marginal social cost equals marginal private cost. 
B)  marginal private cost exceeds marginal social cost. 
C)  marginal social cost exceeds marginal private cost. 
D)  marginal social cost equals marginal external cost.

Question 20

A pollution tax is:

Accepted Answer

A)  a positive externality used to offset a negative one 
B)  a price per unit of discharge of pollution 
C)  a tax on pollution control equipment 
D)  itself a form of negative externality 
A)  a positive externality used to offset a negative one 
B)  a price per unit of discharge of pollution 
C)  a tax on pollution control equipment 
D)  itself a form of negative externality

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

Which of the following statements is true?

Effluent taxes are the most common approach used to control pollutants in the United States.

Government regulations that set an environmental goal and dictate how the goal will be achieved are called:

According to most economists, reducing automobile emissions to zero would be:

The ozone layer:

The Coase Theorem states that the private sector can achieve environmental efficiency, as long as property rights are clearly assigned.

The socially efficient level of output is determined where:

The hot spot problem is:

Combating the "greenhouse effect" has classic free-rider problems.

From society's point of view, the amount of air and water pollution that currently exists is excessive. Which of the following statements are explanations of this excessive pollution?

When using the traditional command-and-control approach to environmental regulation, the government attempts to:

At the market output and price for a good whose production causes pollution:

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

A pollution tax that is exactly equal to marginal external cost will shift the market supply curve to the social-cost supply curve. This tax will thus correct the market inefficiency due to negative externalities by causing price to reflect the full marginal cost of production.

Competitive firms consider private costs, but disregard external costs, when making their economic decisions.

Incentive-based regulations tend to be more efficient than command-and-control regulations.

If firms pollute when they produce:

A pollution tax is:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 14: Environmental Economics

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

Which of the following statements is true?

Effluent taxes are the most common approach used to control pollutants in the United States.

Government regulations that set an environmental goal and dictate how the goal will be achieved are called:

According to most economists, reducing automobile emissions to zero would be:

The ozone layer:

The Coase Theorem states that the private sector can achieve environmental efficiency, as long as property rights are clearly assigned.

The socially efficient level of output is determined where:

The hot spot problem is:

Combating the "greenhouse effect" has classic free-rider problems.

From society's point of view, the amount of air and water pollution that currently exists is excessive. Which of the following statements are explanations of this excessive pollution?

When using the traditional command-and-control approach to environmental regulation, the government attempts to:

At the market output and price for a good whose production causes pollution:

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

A pollution tax that is exactly equal to marginal external cost will shift the market supply curve to the social-cost supply curve. This tax will thus correct the market inefficiency due to negative externalities by causing price to reflect the full marginal cost of production.

Competitive firms consider private costs, but disregard external costs, when making their economic decisions.

Incentive-based regulations tend to be more efficient than command-and-control regulations.

If firms pollute when they produce:

A pollution tax is:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

International Trade and Finance

Economies in Transition

Growth and the

Filters