Question 1

Emission permits allow producers to pollute an unspecified amount.

Accepted Answer

A) True 
 B)False

Question 2

Requiring cars in Chicago to reduce pollution by the same amount as cars in Topeka is efficient.

Accepted Answer

A) True 
 B)False

Question 3

To maximize social welfare in the presence of a negative externality, marginal ____ must equal marginal ____.

Accepted Answer

A)  social cost; private cost 
B)  private cost; social cost 
C)  social cost; social benefit 
D)  private cost; social benefit 
A)  social cost; private cost 
B)  private cost; social cost 
C)  social cost; social benefit 
D)  private cost; social benefit

Question 4

Which of the following best describes social costs?

Accepted Answer

A)  The external costs borne by other members of society, ignoring the private costs to market participants. 
B)  The sum of external costs and private costs. 
C)  External costs minus private costs. 
D)  Private costs minus external costs. 
A)  The external costs borne by other members of society, ignoring the private costs to market participants. 
B)  The sum of external costs and private costs. 
C)  External costs minus private costs. 
D)  Private costs minus external costs.

Question 5

Exhibit 14-3 Impact of flights on house value
Each time Orville flies over Wilber's house, the noise reduces the value of Wilbur's house. The table shows the profits to Orville of each flight, and the value of Wilbur's house. $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Number } \
\text { of flights }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { profits }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { profits }
\end{array} & \begin{array} { c } 
\text { Value of Wilbur's } \
\text { house }
\end{array} \
\hline 1 & \$ 10,000 & \$ 10,000 & \$ 100,000 \
2 & 18,000 & 8,000 & 95,000 \
3 & 24,000 & 6,000 & 90,000 \
4 & 28,000 & 4,000 & 85,000 \
5 & 30,000 & 2,000 & 80,000 \
\hline
\end{array}$$
-As shown in Exhibit 14-3, if Orville has the property right to fly over Wilbur's house, but Wilbur is allowed to negotiate with Orville on the number of flights, what will be the number of flights?

Accepted Answer

A)  2. 
B)  3. 
C)  4. 
D)  5. 
A)  2. 
B)  3. 
C)  4. 
D)  5.

Question 6

The Coase Theorem states that there is different ways to assign property rights if the private sector is to achieve environmental efficiency.

Accepted Answer

A) True 
 B)False

Question 7

The environmental approach found in the Clean Air Act of 1990 is:

Accepted Answer

A)  marketable pollution permits. 
B)  price caps. 
C)  command-and-control regulation. 
D)  a thousand points of light. 
A)  marketable pollution permits. 
B)  price caps. 
C)  command-and-control regulation. 
D)  a thousand points of light.

Question 8

Effluent taxes are not the most common approach used to control pollutants in the United States.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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): $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { of cigarettes }
\end{array} & \begin{array} { c } 
\text { Total value to Jack } \
\text { of cigarettes }
\end{array} & \text { Days of life lost } & \begin{array} { c } 
\text { Total value to Jill } \
\text { of days lost }
\end{array} \
\hline 1 & \$ 50 & 1 & \$ 30 \
2 & 90 & 2 & 60 \
3 & 120 & 3 & 90 \
4 & 140 & 4 & 120 \
5 & 150 & 5 & 150 \
\hline
\end{array}$$
-Factors that prevent the Coase Theorem from working include all of the following, except:

Accepted Answer

A)  private property rights. 
B)  transaction costs. 
C)  income effects. 
D)  more than two individuals affected. 
A)  private property rights. 
B)  transaction costs. 
C)  income effects. 
D)  more than two individuals affected.

Question 11

There is a concern that carbon emissions that are a byproduct of the burning of coal and other fuels contributes to global warming. One proposed solution is to tax the use of these fuels based on their carbon content. The following table gives information on the demand and supply of coal: $$\begin{array} { | l | r r r r r | } 
\hline \text { Price (\$/ton) } & 400 & 358 & 300 & 250 & 200 \
\hline \text { Quantity demanded } & 10 & 12 & 14 & 16 & 18 \
\hline \text { Quantity supplied } & 18 & 16 & 14 & 12 & 10 \
\hline
\end{array}$$ What will be the free-market price and quantity, and what will be the price and quantity if the government requires suppliers to pay a $100 tax for each ton of coal produced?

Accepted Answer

The free market balances at Q = 14, P =

Question 12

As a general rule, if pollution costs are external, firms will produce:

Accepted Answer

A)  too little of a polluting good. 
B)  too much of a polluting good. 
C)  an optimal amount of a polluting good. 
D)  cannot be determined without additional information. 
A)  too little of a polluting good. 
B)  too much of a polluting good. 
C)  an optimal amount of a polluting good. 
D)  cannot be determined without additional information.

Question 13

At the efficient level of pollution, the:

Accepted Answer

A)  total social costs and total social benefits of reduction are equal. 
B)  marginal social costs and marginal social benefits are equal. 
C)  marginal private costs and marginal private benefits are equal. 
D)  total private costs and total private benefits are equal. 
A)  total social costs and total social benefits of reduction are equal. 
B)  marginal social costs and marginal social benefits are equal. 
C)  marginal private costs and marginal private benefits are equal. 
D)  total private costs and total private benefits are equal.

Question 14

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, what is the socially efficient number of cigarettes?

Accepted Answer

A)  0. 
B)  1. 
C)  3. 
D)  5. 
A)  0. 
B)  1. 
C)  3. 
D)  5.

Question 15

The Coase Theorem states that there is a single unique way to assign property rights if the private sector is to achieve environmental efficiency.

Accepted Answer

A) True 
 B)False

Question 16

From an economic perspective, the socially best amount of pollution control is that amount in which:

Accepted Answer

A)  there is zero pollution. 
B)  the private plus external marginal costs are equal to the private plus external marginal benefits. 
C)  the private plus external marginal costs are less than the private plus external marginal benefits. 
D)  the private marginal costs are equal to the private marginal benefits. 
E)  the external costs equal the external benefits. 
A)  there is zero pollution. 
B)  the private plus external marginal costs are equal to the private plus external marginal benefits. 
C)  the private plus external marginal costs are less than the private plus external marginal benefits. 
D)  the private marginal costs are equal to the private marginal benefits. 
E)  the external costs equal the external benefits.

Question 17

Solar vehicles that operate on photovoltaic cells:

Accepted Answer

A)  are economically efficient today as compared to gasoline vehicles. 
B)  are not economically efficient because they create greater negative externalities than gasoline vehicles. 
C)  are not economically efficient even though they create fewer negative externalities than gasoline vehicles. 
D)  should be subsidized by government so that they cost less than gasoline automobiles. 
A)  are economically efficient today as compared to gasoline vehicles. 
B)  are not economically efficient because they create greater negative externalities than gasoline vehicles. 
C)  are not economically efficient even though they create fewer negative externalities than gasoline vehicles. 
D)  should be subsidized by government so that they cost less than gasoline automobiles.

Question 18

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

Accepted Answer

A)  The citizens of Wyoming will experience higher sulfur emissions as a result of the emissions trading program. 
B)  The citizens of Wyoming will experience lower sulfur emissions as a result of the emissions trading program. 
C)  The citizens of Tennessee will pay more to reduce sulfur emissions than if the government used a command-and-control approach. 
D)  The citizens of North Carolina will suffer higher emissions as a result of the emissions trading program. 
A)  The citizens of Wyoming will experience higher sulfur emissions as a result of the emissions trading program. 
B)  The citizens of Wyoming will experience lower sulfur emissions as a result of the emissions trading program. 
C)  The citizens of Tennessee will pay more to reduce sulfur emissions than if the government used a command-and-control approach. 
D)  The citizens of North Carolina will suffer higher emissions as a result of the emissions trading program.

Question 19

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 non-smokers have a right to a smoke-free environment, and smokers have the right to negotiate, how many days of life will Jill lose?

Accepted Answer

A)  0. 
B)  1. 
C)  3. 
D)  5. 
A)  0. 
B)  1. 
C)  3. 
D)  5.

Question 20

Exhibit 14-1 Private and social cost  
-The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

Accepted Answer

A)  voluntarily incur costs to reduce its pollution. 
B)  produce at output rate Q3. 
C)  produce at output rate Q2. 
D)  produce at output rate Q4. 
A)  voluntarily incur costs to reduce its pollution. 
B)  produce at output rate Q3. 
C)  produce at output rate Q2. 
D)  produce at output rate Q4.

Emission permits allow producers to pollute an unspecified amount.

Requiring cars in Chicago to reduce pollution by the same amount as cars in Topeka is efficient.

To maximize social welfare in the presence of a negative externality, marginal must equal marginal .

Which of the following best describes social costs?

The Coase Theorem states that there is different ways to assign property rights if the private sector is to achieve environmental efficiency.

The environmental approach found in the Clean Air Act of 1990 is:

Effluent taxes are not the most common approach used to control pollutants in the United States.

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

As a general rule, if pollution costs are external, firms will produce:

At the efficient level of pollution, the:

The Coase Theorem states that there is a single unique way to assign property rights if the private sector is to achieve environmental efficiency.

From an economic perspective, the socially best amount of pollution control is that amount in which:

Solar vehicles that operate on photovoltaic cells:

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

Exhibit 14-1 Private and social cost -The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

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

Emission permits allow producers to pollute an unspecified amount.

Requiring cars in Chicago to reduce pollution by the same amount as cars in Topeka is efficient.

To maximize social welfare in the presence of a negative externality, marginal ____ must equal marginal ____.

Which of the following best describes social costs?

The Coase Theorem states that there is different ways to assign property rights if the private sector is to achieve environmental efficiency.

The environmental approach found in the Clean Air Act of 1990 is:

Effluent taxes are not the most common approach used to control pollutants in the United States.

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

As a general rule, if pollution costs are external, firms will produce:

At the efficient level of pollution, the:

The Coase Theorem states that there is a single unique way to assign property rights if the private sector is to achieve environmental efficiency.

From an economic perspective, the socially best amount of pollution control is that amount in which:

Solar vehicles that operate on photovoltaic cells:

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

Exhibit 14-1 Private and social cost -The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:

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

To maximize social welfare in the presence of a negative externality, marginal must equal marginal .