Question 1

A ban on exportation of ivory by itself restricts legal supply, raises the world price, and encourages illegal trade.

Accepted Answer

A) True 
 B)False

Question 2

The figure given below depicts the relationship between the social benefits and social costs associated with different levels of pollution. The two curves are Social Marginal Cost (SMC) and Social Marginal Benefit (SMB). The other terminologies are P = Price of the commodity, MC = Marginal Cost (private), and MB = Marginal Benefit (private). For pollution level 'a', _____, therefore the country should _____ pollution.

Accepted Answer

A) SMB > SMC; increase B) SMC = SMC; decrease C) SMB < SMC; increase D) SMC < MC = P = MB; decrease A) SMB > SMC; increase B) SMC = SMC; decrease C) SMB < SMC; increase D) SMC < MC = P = MB; decrease

Question 3

As the world moves toward freer trade, the composition of production shifts so that more environmentally "dirty" products are produced in _____ and more environmentally "clean" products are produced in _____.

Accepted Answer

A) industrialized countries; developing countries 
B) developing countries; industrialized countries 
C) both industrialized and developing countries; only industrialized countries 
D) developing countries; neither industrialized nor developing countries 
A) industrialized countries; developing countries 
B) developing countries; industrialized countries 
C) both industrialized and developing countries; only industrialized countries 
D) developing countries; neither industrialized nor developing countries

Question 4

Changing property rights as a way to correct externalities is always preferred to the use of government taxes and subsidies.

Accepted Answer

A) True 
 B)False

Question 5

Do you think the GATT and WTO rulings on the U.S. efforts to reduce the number of dolphin and sea turtle mortalities were justified? In your answer be sure to explain the rulings and reasons behind these rulings. How might the United States have changed its policies so that it did not violate WTO rules?

Accepted Answer

The GATT panel ruled that the United Sta

Question 6

As a result of the Uruguay Round, production of _____ goods increased in Asian developing countries and polluting emissions in these countries _____ as a result.

Accepted Answer

A) capital and skill-intensive; decreased 
B) capital and skill-intensive; increased 
C) unskilled-labor-intensive; decreased 
D) unskilled-labor-intensive; increased 
A) capital and skill-intensive; decreased 
B) capital and skill-intensive; increased 
C) unskilled-labor-intensive; decreased 
D) unskilled-labor-intensive; increased

Question 7

The WTO ruled that the U.S. regulations on the fuel economy of cars sold by each manufacturer:

Accepted Answer

A) were permissible under Article XX. 
B) was a permissible reaction to similar regulations imposed by the Japanese government on the automobiles imported from the United States. 
C) violated the WTO rules because the imported automobiles were treated differently from domestic autos. 
D) was not an issue under their purview. 
A) were permissible under Article XX. 
B) was a permissible reaction to similar regulations imposed by the Japanese government on the automobiles imported from the United States. 
C) violated the WTO rules because the imported automobiles were treated differently from domestic autos. 
D) was not an issue under their purview.

Question 8

What elements does a solution to excessive global warming include? Explain each of these briefly.

Accepted Answer

Global problems require global solutions

Question 9

If domestic production of a product causes pollution that imposes an external cost on the country, then:

Accepted Answer

A) exports of the product should be subsidized. 
B) exports of the product offset the external costs. 
C) exports of the product can make the country worse off. 
D) exports are less than they would be otherwise. 
A) exports of the product should be subsidized. 
B) exports of the product offset the external costs. 
C) exports of the product can make the country worse off. 
D) exports are less than they would be otherwise.

Question 10

Which of the following is an example of an international externality, in which production (or consumption) activities in one country impose external costs on other countries?

Accepted Answer

A) Transborder pollution 
B) Persistent dumping 
C) Free riding 
D) Moral hazard 
A) Transborder pollution 
B) Persistent dumping 
C) Free riding 
D) Moral hazard

Question 11

An example of the specificity rule in action is:

Accepted Answer

A) restricting imports in order to reduce environmental pollution. 
B) taxing the consumption of a product whose production creates a great deal of pollution. 
C) taxing the production of a product whose production creates a great deal of pollution. 
D) imposing price floors on "clean" products as a way to increase the demand for these products. 
A) restricting imports in order to reduce environmental pollution. 
B) taxing the consumption of a product whose production creates a great deal of pollution. 
C) taxing the production of a product whose production creates a great deal of pollution. 
D) imposing price floors on "clean" products as a way to increase the demand for these products.

Question 12

Increases in global temperatures are likely to result in larger economic losses for the countries in Eastern Europe than for the countries in Asia and Africa that are close to the equator.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following was NOT a reason why the signing and enforcement of the Montreal Protocol was relatively easy?

Accepted Answer

A) The scientific evidence about the threat that CFCs posed to the ozone was clear. 
B) The production of substitutes for the CFCs appeared to be technologically unfeasible. 
C) Production of CFCs was concentrated primarily in a few large publicity-conscious firms in the EU and the U.S. 
D) The U.S.and the EU were most likely to be affected by ozone depletion because they are closer to the poles than other countries, and they were also the largest producers. 
A) The scientific evidence about the threat that CFCs posed to the ozone was clear. 
B) The production of substitutes for the CFCs appeared to be technologically unfeasible. 
C) Production of CFCs was concentrated primarily in a few large publicity-conscious firms in the EU and the U.S. 
D) The U.S.and the EU were most likely to be affected by ozone depletion because they are closer to the poles than other countries, and they were also the largest producers.

Question 14

Identify the correct statement.

Accepted Answer

A) There is sufficient evidence to prove that free trade simply promotes production and consumption of products that tend to cause large amounts of pollution. 
B) It is not easy to find cases where government policies that limit or distort trade result in environmental damage. 
C) Freer trade in environmental services actually lower environmental quality especially in the developing countries. 
D) Environmentalists often fear that free trade permits production to be shifted to countries that have lax environmental standards. 
A) There is sufficient evidence to prove that free trade simply promotes production and consumption of products that tend to cause large amounts of pollution. 
B) It is not easy to find cases where government policies that limit or distort trade result in environmental damage. 
C) Freer trade in environmental services actually lower environmental quality especially in the developing countries. 
D) Environmentalists often fear that free trade permits production to be shifted to countries that have lax environmental standards.

Question 15

A good is said to be overproduced in an economy if:

Accepted Answer

A) the marginal cost of producing the good is less than its price. 
B) the marginal benefit derived from the consumption of the good is more than the price. 
C) the social marginal cost exceeds the social marginal benefit. 
D) the production of the good generates a positive externality. 
A) the marginal cost of producing the good is less than its price. 
B) the marginal benefit derived from the consumption of the good is more than the price. 
C) the social marginal cost exceeds the social marginal benefit. 
D) the production of the good generates a positive externality.

Question 16

The specificity rule states that:

Accepted Answer

A) The government should have a uniform policy in place to address the specific distortions in the economy. 
B) it is more efficient to use a policy tool that is closer to the distortion that is caused by an externality. 
C) property rights must be changed in order to correct for an externality. 
D) a government tax is the best remedial measure for an externality. 
A) The government should have a uniform policy in place to address the specific distortions in the economy. 
B) it is more efficient to use a policy tool that is closer to the distortion that is caused by an externality. 
C) property rights must be changed in order to correct for an externality. 
D) a government tax is the best remedial measure for an externality.

Question 17

Which of the following statements is true?

Accepted Answer

A) The WTO allows a country to impose a trade restriction on imports of a good because it was produced using methods that violate the importing country's environmental standards. 
B) The WTO allows a country to impose an import restriction on a good for health reasons as long as the country also restricts the domestic production and consumption of the good. 
C) The WTO is the final arbiter of whether goods pose a health or safety risk. 
D) The WTO allows countries to pursue environmental protection using policies that may affect international trade and hence is unable to address the problem of disguised protectionism. 
A) The WTO allows a country to impose a trade restriction on imports of a good because it was produced using methods that violate the importing country's environmental standards. 
B) The WTO allows a country to impose an import restriction on a good for health reasons as long as the country also restricts the domestic production and consumption of the good. 
C) The WTO is the final arbiter of whether goods pose a health or safety risk. 
D) The WTO allows countries to pursue environmental protection using policies that may affect international trade and hence is unable to address the problem of disguised protectionism.

Question 18

The Montreal Protocol bans international trade in endangered species.

Accepted Answer

A) True 
 B)False

Question 19

Free trade may lead to less pollution because:

Accepted Answer

A) it results in increased production and consumption of goods and services. 
B) competition among nations leads to stricter pollution standards. 
C) higher income can lead to political pressure on governments to enact tougher environmental protection policies. 
D) imported products are produced using cleaner production techniques than domestic products. 
A) it results in increased production and consumption of goods and services. 
B) competition among nations leads to stricter pollution standards. 
C) higher income can lead to political pressure on governments to enact tougher environmental protection policies. 
D) imported products are produced using cleaner production techniques than domestic products.

Question 20

In a market, distortions do not exist if:

Accepted Answer

A) the social marginal benefit is greater than the social marginal cost. 
B) the social marginal benefit is equal to the social marginal cost. 
C) the social marginal benefit is less than the social marginal cost. 
D) the private marginal benefit is greater than the social marginal benefit. 
A) the social marginal benefit is greater than the social marginal cost. 
B) the social marginal benefit is equal to the social marginal cost. 
C) the social marginal benefit is less than the social marginal cost. 
D) the private marginal benefit is greater than the social marginal benefit.

Exam 13: Trade and the Environment

A ban on exportation of ivory by itself restricts legal supply, raises the world price, and encourages illegal trade.

As the world moves toward freer trade, the composition of production shifts so that more environmentally "dirty" products are produced in _____ and more environmentally "clean" products are produced in _____.

Changing property rights as a way to correct externalities is always preferred to the use of government taxes and subsidies.

As a result of the Uruguay Round, production of _____ goods increased in Asian developing countries and polluting emissions in these countries _____ as a result.

The WTO ruled that the U.S. regulations on the fuel economy of cars sold by each manufacturer:

What elements does a solution to excessive global warming include? Explain each of these briefly.

If domestic production of a product causes pollution that imposes an external cost on the country, then:

Which of the following is an example of an international externality, in which production (or consumption) activities in one country impose external costs on other countries?

An example of the specificity rule in action is:

Increases in global temperatures are likely to result in larger economic losses for the countries in Eastern Europe than for the countries in Asia and Africa that are close to the equator.

Which of the following was NOT a reason why the signing and enforcement of the Montreal Protocol was relatively easy?

Identify the correct statement.

A good is said to be overproduced in an economy if:

The specificity rule states that:

Which of the following statements is true?

The Montreal Protocol bans international trade in endangered species.

Free trade may lead to less pollution because:

In a market, distortions do not exist if:

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

As the world moves toward freer trade, the composition of production shifts so that more environmentally "dirty" products are produced in _ and more environmentally "clean" products are produced in _.

As a result of the Uruguay Round, production of _ goods increased in Asian developing countries and polluting emissions in these countries _ as a result.