Question 1

When negative externalities like pollution exist, competition leads to:

Accepted Answer

A)  a socially efficient outcome. 
B)  too few goods being bought and sold. 
C)  a market equilibrium price that is too high. 
D)  more production than would be efficient. 
A)  a socially efficient outcome. 
B)  too few goods being bought and sold. 
C)  a market equilibrium price that is too high. 
D)  more production than would be efficient.

Question 2

In the long run, command-and-control (CAC) regulations encourage firms to develop new technology to lower future emissions.

Accepted Answer

A) True 
 B)False

Question 3

From an economic viewpoint, the optimal amount of pollution:

Accepted Answer

A)  is zero since all pollution imposes costs on society. 
B)  is that amount which firms create when they maximize economic profits by setting their marginal private costs equal to market price. 
C)  is that amount where the marginal social costs of producing a good precisely equals the price of the good. 
D)  b and c are correct. 
A)  is zero since all pollution imposes costs on society. 
B)  is that amount which firms create when they maximize economic profits by setting their marginal private costs equal to market price. 
C)  is that amount where the marginal social costs of producing a good precisely equals the price of the good. 
D)  b and c are correct.

Question 4

In a perfectly competitive industry, which of the following is true?

Accepted Answer

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

Question 5

The agency in charge of environmental law is the Environmental Protection Agency.

Accepted Answer

A) True 
 B)False

Question 6

Combating the "greenhouse effect" does not create classic free-rider problems.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  placing a tax on freon to reduce its use and the corresponding CFC emissions (which contribute to the ozone hole). 
B)  requiring car producers to install new air conditioners that do not use freon. 
C)  allowing coal producers to buy and sell permits to allow CFC emissions. 
D)  allowing individuals to sue freon producers if CFC emissions exceed a government-set standard. 
A)  placing a tax on freon to reduce its use and the corresponding CFC emissions (which contribute to the ozone hole). 
B)  requiring car producers to install new air conditioners that do not use freon. 
C)  allowing coal producers to buy and sell permits to allow CFC emissions. 
D)  allowing individuals to sue freon producers if CFC emissions exceed a government-set standard.

Question 8

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 Wilbur has the property right to have no planes flying over his house, but Orville is allowed to negotiate with Wilber, 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 9

Recently, the State of Tennessee discovered chemical compounds in their drinking water which may cause cancer. Since Tennessee's drinking water comes from the Pigeon River in North Carolina, the source of these chemicals is the waste discharges of industrial paper plants in North Carolina. This is an example of a(n):

Accepted Answer

A)  external cost imposed on the citizens of Tennessee by the industrial plants of North Carolina. 
B)  market failure where the market price of the output of these industrial plants does not fully reflect the social cost of producing these goods. 
C)  externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. 
D)  all of these. 
A)  external cost imposed on the citizens of Tennessee by the industrial plants of North Carolina. 
B)  market failure where the market price of the output of these industrial plants does not fully reflect the social cost of producing these goods. 
C)  externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. 
D)  all of these.

Question 10

Voluntary programs are dependable ways to protect the environment.

Accepted Answer

A) True 
 B)False

Question 11

Command-and-control legislation, as compared to incentive-based regulation:

Accepted Answer

A)  encourages the use of comparative advantage in the short run, and the development of new technology in the long run. 
B)  encourages the use of comparative advantage in the short run, but discourages the development of new technology in the long run. 
C)  discourages the use of comparative advantage in the short run, but encourages the development of new technology in the long run. 
D)  discourages the use of comparative advantage in the short run, and discourages the development of new technology in the long run. 
A)  encourages the use of comparative advantage in the short run, and the development of new technology in the long run. 
B)  encourages the use of comparative advantage in the short run, but discourages the development of new technology in the long run. 
C)  discourages the use of comparative advantage in the short run, but encourages the development of new technology in the long run. 
D)  discourages the use of comparative advantage in the short run, and discourages the development of new technology in the long run.

Question 12

Which of the following provides an example of command-and-control regulation?

Accepted Answer

A)  ​Taxing producers based on the external costs created by their pollution, thus internalizing external costs. 
B)  ​ Requiring firms to reduce their pollution by 50 percent, thus allowing them to emit 50 percent of their historical emissions, and allowing them to freely buy and sell allowances. 
C)  ​Requiring firms to use a particular type of pollution-control technology, such as smokestack scrubbers or catalytic converters. 
D)  ​Subsidizing firms that exceed their pollution-control targets.​ 
A)  ​Taxing producers based on the external costs created by their pollution, thus internalizing external costs. 
B)  ​ Requiring firms to reduce their pollution by 50 percent, thus allowing them to emit 50 percent of their historical emissions, and allowing them to freely buy and sell allowances. 
C)  ​Requiring firms to use a particular type of pollution-control technology, such as smokestack scrubbers or catalytic converters. 
D)  ​Subsidizing firms that exceed their pollution-control targets.​

Question 13

A government policy that charges coal producers a fee per ton of coal produced (an "effluent charge"), where the fee is determined by the amount of pollutants discharged into the air or water, will lead to a(n):

Accepted Answer

A)  decrease in the market equilibrium quantity of coal produced. 
B)  decrease in the market equilibrium price of coal. 
C)  increase in the market equilibrium price of coal. 
D)  a and c are correct. 
A)  decrease in the market equilibrium quantity of coal produced. 
B)  decrease in the market equilibrium price of coal. 
C)  increase in the market equilibrium price of coal. 
D)  a and c are correct.

Question 14

Cite an advantage and a disadvantage for command-and-control vs. incentive-based approaches. Then do the same for environmental taxes vs. emissions trading.

Accepted Answer

Command-and-control is simple, since it

Question 15

The costs of an economic activity borne by the producers are:

Accepted Answer

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

Question 16

Suppose a firm wants to build a new factory that would add pollution to an already polluted area. Under an offset program, the firm must:

Accepted Answer

A)  install scrubbers and other government-mandated equipment. 
B)  purchase pollution permits from the government. 
C)  reduce or eliminate an old pollution source in the area. 
D)  pay a tax which depends on the amount of pollution created. 
A)  install scrubbers and other government-mandated equipment. 
B)  purchase pollution permits from the government. 
C)  reduce or eliminate an old pollution source in the area. 
D)  pay a tax which depends on the amount of pollution created.

Question 17

Which of the following is an example of a positive externality? ​

Accepted Answer

A)  ​ A firm emits pollution into the air, harming members of society. 
B)  ​An auto body shop makes a lot of noise, reducing the property values of nearby homes. 
C)  ​A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood. 
D)  ​You go to a store and pay $0.65 for a candy bar that you then eat. 
A)  ​ A firm emits pollution into the air, harming members of society. 
B)  ​An auto body shop makes a lot of noise, reducing the property values of nearby homes. 
C)  ​A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood. 
D)  ​You go to a store and pay $0.65 for a candy bar that you then eat.

Question 18

In order to achieve social efficiency, the size of an effluent tax should be based on:

Accepted Answer

A)  the external cost created by the pollutant. 
B)  people's willingness to pay for a cleaner environment. 
C)  the expense of installing new "green" equipment. 
D)  the number of free riders in the industry. 
A)  the external cost created by the pollutant. 
B)  people's willingness to pay for a cleaner environment. 
C)  the expense of installing new "green" equipment. 
D)  the number of free riders in the industry.

Question 19

Which of the following best describes social benefits?

Accepted Answer

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

Question 20

Which of the following statements is true?

Accepted Answer

A)  Competitive markets result in the socially efficient price and quantity when externalities exist. 
B)  Command-and-control regulations set an environmental goal and dictate how the goal will be achieved. 
C)  Economists prefer command-and-control regulations to incentive-based pollution programs. 
D)  An effluent tax is a tax imposed on rich people. 
A)  Competitive markets result in the socially efficient price and quantity when externalities exist. 
B)  Command-and-control regulations set an environmental goal and dictate how the goal will be achieved. 
C)  Economists prefer command-and-control regulations to incentive-based pollution programs. 
D)  An effluent tax is a tax imposed on rich people.

When negative externalities like pollution exist, competition leads to:

In the long run, command-and-control (CAC) regulations encourage firms to develop new technology to lower future emissions.

From an economic viewpoint, the optimal amount of pollution:

In a perfectly competitive industry, which of the following is true?

The agency in charge of environmental law is the Environmental Protection Agency.

Combating the "greenhouse effect" does not create classic free-rider problems.

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

Voluntary programs are dependable ways to protect the environment.

Command-and-control legislation, as compared to incentive-based regulation:

Which of the following provides an example of command-and-control regulation?

A government policy that charges coal producers a fee per ton of coal produced (an "effluent charge"), where the fee is determined by the amount of pollutants discharged into the air or water, will lead to a(n):

Cite an advantage and a disadvantage for command-and-control vs. incentive-based approaches. Then do the same for environmental taxes vs. emissions trading.

The costs of an economic activity borne by the producers are:

Suppose a firm wants to build a new factory that would add pollution to an already polluted area. Under an offset program, the firm must:

Which of the following is an example of a positive externality?

In order to achieve social efficiency, the size of an effluent tax should be based on:

Which of the following best describes social benefits?

Which of the following statements is true?

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

When negative externalities like pollution exist, competition leads to:

In the long run, command-and-control (CAC) regulations encourage firms to develop new technology to lower future emissions.

From an economic viewpoint, the optimal amount of pollution:

In a perfectly competitive industry, which of the following is true?

The agency in charge of environmental law is the Environmental Protection Agency.

Combating the "greenhouse effect" does not create classic free-rider problems.

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

Voluntary programs are dependable ways to protect the environment.

Command-and-control legislation, as compared to incentive-based regulation:

Which of the following provides an example of command-and-control regulation?

A government policy that charges coal producers a fee per ton of coal produced (an "effluent charge"), where the fee is determined by the amount of pollutants discharged into the air or water, will lead to a(n):

Cite an advantage and a disadvantage for command-and-control vs. incentive-based approaches. Then do the same for environmental taxes vs. emissions trading.

The costs of an economic activity borne by the producers are:

Suppose a firm wants to build a new factory that would add pollution to an already polluted area. Under an offset program, the firm must:

Which of the following is an example of a positive externality? ​

In order to achieve social efficiency, the size of an effluent tax should be based on:

Which of the following best describes social benefits?

Which of the following statements is true?

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 an example of a positive externality?