Question 1

People are unlikely to choose to pay extra for a low-emissions automobile, because they:

Accepted Answer

A)  do not fully understand the environmental benefits of lower emissions. 
B)  are better off "free-riding" on others' attempts to reduce emissions. 
C)  would have to sacrifice fuel efficiency and automotive performance. 
D)  cannot afford the extra expense of "green" technology. 
A)  do not fully understand the environmental benefits of lower emissions. 
B)  are better off "free-riding" on others' attempts to reduce emissions. 
C)  would have to sacrifice fuel efficiency and automotive performance. 
D)  cannot afford the extra expense of "green" technology.

Question 2

Which of the following is true when profit-maximizing firms in a competitive market are allowed to freely emit negative externalities on society? ​

Accepted Answer

A)  ​Consumers are paying a market equilibrium price that reflects the full social marginal cost of production. 
B)  ​Consumers are paying a market equilibrium price that reflects only the external marginal cost of production. 
C)  ​Consumers are paying a market equilibrium price that is less than the socially efficient price, and consuming more than the socially efficient quantity. This means society is implicitly subsidizing producers by allowing them to pollute. 
D)  ​None of the above is correct. 
A)  ​Consumers are paying a market equilibrium price that reflects the full social marginal cost of production. 
B)  ​Consumers are paying a market equilibrium price that reflects only the external marginal cost of production. 
C)  ​Consumers are paying a market equilibrium price that is less than the socially efficient price, and consuming more than the socially efficient quantity. This means society is implicitly subsidizing producers by allowing them to pollute. 
D)  ​None of the above is correct.

Question 3

Reducing pollution to zero emissions would be socially efficient.

Accepted Answer

A) True 
 B)False

Question 4

According the Coase Theorem, the private sector can achieve social efficiency if the government:

Accepted Answer

A)  establishes and enforces property rights. 
B)  imposes taxes to serve as proxies for external costs. 
C)  set rigorous environmental standards. 
D)  encourages competition with antitrust laws. 
A)  establishes and enforces property rights. 
B)  imposes taxes to serve as proxies for external costs. 
C)  set rigorous environmental standards. 
D)  encourages competition with antitrust laws.

Question 5

A totally pollution free environment should be a primary social goal.

Accepted Answer

A) True 
 B)False

Question 6

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation.
​

Accepted Answer

The market results in too low a price an

Question 7

The pig farm industry is perfectly competitive. Which of the following is true?

Accepted Answer

A)  Since the industry is perfectly competitive, price and quantity are at the socially efficient levels. 
B)  The competitive price is higher and quantity lower than the socially efficient point. 
C)  The competitive price is higher and quantity higher than the socially efficient point. 
D)  The competitive price is lower and quantity higher than the socially efficient point. 
A)  Since the industry is perfectly competitive, price and quantity are at the socially efficient levels. 
B)  The competitive price is higher and quantity lower than the socially efficient point. 
C)  The competitive price is higher and quantity higher than the socially efficient point. 
D)  The competitive price is lower and quantity higher than the socially efficient point.

Question 8

Which of the following is not an obstacle to achieving environmental efficiency through markets?

Accepted Answer

A)  Transactions costs. 
B)  Income effects. 
C)  Free-rider problems. 
D)  Private negotiations. 
A)  Transactions costs. 
B)  Income effects. 
C)  Free-rider problems. 
D)  Private negotiations.

Question 9

Transactions costs are defined to be the costs of:

Accepted Answer

A)  negotiating and enforcing contracts. 
B)  complying with environmental regulations. 
C)  eliminating market and government failures. 
D)  finding and obtaining offsets. 
A)  negotiating and enforcing contracts. 
B)  complying with environmental regulations. 
C)  eliminating market and government failures. 
D)  finding and obtaining offsets.

Question 10

A totally pollution free environment should not be a primary social goal.

Accepted Answer

A) True 
 B)False

Question 11

Emission permits allow producers to pollute a specified amount.

Accepted Answer

A) True 
 B)False

Question 12

Explain why companies that choose low-pollution technologies will find it hard to survive in a competitive industry.

Accepted Answer

In order to survive in a competitive ind

Question 13

The economically efficient car is the one with the lowest emissions.

Accepted Answer

A) True 
 B)False

Question 14

Private costs are:

Accepted Answer

A)  the full resource costs of an economic activity. 
B)  always less than social costs. 
C)  the costs of an economic activity borne by the producer. 
D)  all of these. 
A)  the full resource costs of an economic activity. 
B)  always less than social costs. 
C)  the costs of an economic activity borne by the producer. 
D)  all of these.

Question 15

An example of the command-and-control approach to environmental policy is:

Accepted Answer

A)  allowing individuals to sue freon producers if CFC emissions exceed a government-set standard. 
B)  allowing coal producers to buy and sell permits to allow CFC emissions. 
C)  placing a tax on freon to reduce its use and the corresponding CFC emissions (which contribute to the ozone hole). 
D)  none of these. 
A)  allowing individuals to sue freon producers if CFC emissions exceed a government-set standard. 
B)  allowing coal producers to buy and sell permits to allow CFC emissions. 
C)  placing a tax on freon to reduce its use and the corresponding CFC emissions (which contribute to the ozone hole). 
D)  none of these.

Question 16

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Accepted Answer

A)  Some firms can reduce emissions at a lower cost than other firms. 
B)  A market with a small number of buyers and sellers. 
C)  Imperfect information exists on the value of a permit. 
D)  There are concerns about the value of permits in the future. 
A)  Some firms can reduce emissions at a lower cost than other firms. 
B)  A market with a small number of buyers and sellers. 
C)  Imperfect information exists on the value of a permit. 
D)  There are concerns about the value of permits in the future.

Question 17

Incentive-based regulatory approaches:

Accepted Answer

A)  are viewed favorably by most economists as a way to control pollution. 
B)  provide less flexibility than the command-and-control approach. 
C)  tend to hurt wealthier people more than poor people. 
D)  require that the government specify certain types of pollution control technology that firms must adopt. 
A)  are viewed favorably by most economists as a way to control pollution. 
B)  provide less flexibility than the command-and-control approach. 
C)  tend to hurt wealthier people more than poor people. 
D)  require that the government specify certain types of pollution control technology that firms must adopt.

Question 18

Consider a competitive industry in which a "green" company uses a cleaner but costlier production method than is used by other firms. In the long run, the "green" company will:

Accepted Answer

A)  earn more profit than will the typical firm in the industry. 
B)  drive its competitors out of business. 
C)  have economic losses and exit the industry. 
D)  charge a higher-than-average price for its product. 
A)  earn more profit than will the typical firm in the industry. 
B)  drive its competitors out of business. 
C)  have economic losses and exit the industry. 
D)  charge a higher-than-average price for its product.

Question 19

According to Elinor Ostrom's view of The Tragedy of the Commons:

Accepted Answer

A)  The only way to prevent the collapse of the commons is government intervention. 
B)  The only way to prevent the collapse of the commons is to privatize the commons so that it is owned by a single individual. 
C)  Individuals will create institutions to prevent the collapse of the commons. 
D)  Individuals will use the commons beyond the socially efficient point. 
A)  The only way to prevent the collapse of the commons is government intervention. 
B)  The only way to prevent the collapse of the commons is to privatize the commons so that it is owned by a single individual. 
C)  Individuals will create institutions to prevent the collapse of the commons. 
D)  Individuals will use the commons beyond the socially efficient point.

Question 20

When externalities exist, economic efficiency is achieved when marginal private benefit equals marginal private cost.

Accepted Answer

A) True 
 B)False

People are unlikely to choose to pay extra for a low-emissions automobile, because they:

Which of the following is true when profit-maximizing firms in a competitive market are allowed to freely emit negative externalities on society?

Reducing pollution to zero emissions would be socially efficient.

According the Coase Theorem, the private sector can achieve social efficiency if the government:

A totally pollution free environment should be a primary social goal.

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation.

The pig farm industry is perfectly competitive. Which of the following is true?

Which of the following is not an obstacle to achieving environmental efficiency through markets?

Transactions costs are defined to be the costs of:

A totally pollution free environment should not be a primary social goal.

Emission permits allow producers to pollute a specified amount.

Explain why companies that choose low-pollution technologies will find it hard to survive in a competitive industry.

The economically efficient car is the one with the lowest emissions.

Private costs are:

An example of the command-and-control approach to environmental policy is:

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Incentive-based regulatory approaches:

Consider a competitive industry in which a "green" company uses a cleaner but costlier production method than is used by other firms. In the long run, the "green" company will:

According to Elinor Ostrom's view of The Tragedy of the Commons:

When externalities exist, economic efficiency is achieved when marginal private benefit equals marginal private cost.

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

People are unlikely to choose to pay extra for a low-emissions automobile, because they:

Which of the following is true when profit-maximizing firms in a competitive market are allowed to freely emit negative externalities on society? ​

Reducing pollution to zero emissions would be socially efficient.

According the Coase Theorem, the private sector can achieve social efficiency if the government:

A totally pollution free environment should be a primary social goal.

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation. ​

The pig farm industry is perfectly competitive. Which of the following is true?

Which of the following is not an obstacle to achieving environmental efficiency through markets?

Transactions costs are defined to be the costs of:

A totally pollution free environment should not be a primary social goal.

Emission permits allow producers to pollute a specified amount.

Explain why companies that choose low-pollution technologies will find it hard to survive in a competitive industry.

The economically efficient car is the one with the lowest emissions.

Private costs are:

An example of the command-and-control approach to environmental policy is:

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Incentive-based regulatory approaches:

Consider a competitive industry in which a "green" company uses a cleaner but costlier production method than is used by other firms. In the long run, the "green" company will:

According to Elinor Ostrom's view of The Tragedy of the Commons:

When externalities exist, economic efficiency is achieved when marginal private benefit equals marginal private cost.

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

Which of the following is true when profit-maximizing firms in a competitive market are allowed to freely emit negative externalities on society?

Compare market price and quantity to socially optimal price and quantity if hog farmers ignore the polluting effect of hog waste on nearby waterways. Use a graph to assist in your explanation.