Question 1

If at the current amount of pollution its marginal social benefit is greater than its marginal social cost, then there is too little pollution.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer question:
Figure: Environmental Standards versus Emissions Taxes  
-(Figure: Environmental Standards versus Emissions Taxes) In the figure Environmental Standards versus Emissions Taxes, if the goal is to limit the total emissions of the two firms, A and B, to 600 tons, the most efficient solution is an _____, and total pollution would be _____ tons.

Accepted Answer

A)  environmental standard; 300 
B)  emissions tax; 600 
C)  environmental standard; 600 
D)  emissions tax; 200 
A)  environmental standard; 300 
B)  emissions tax; 600 
C)  environmental standard; 600 
D)  emissions tax; 200

Question 3

Use the following to answer questions:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:

Accepted Answer

A)  MSB < MSC. 
B)  MSC < MSB. 
C)  total cost = total benefit. 
D)  MSC = MSB. 
A)  MSB < MSC. 
B)  MSC < MSB. 
C)  total cost = total benefit. 
D)  MSC = MSB.

Question 4

The marginal social benefit of pollution:

Accepted Answer

A)  is zero, since pollution is not beneficial. 
B)  can be measured as the additional gain to society from one additional unit of pollution. 
C)  is easy to estimate, since polluters are required to file this information in their tax returns. 
D)  is equal to the marginal social cost of pollution, since benefits to producers are equal to costs to consumers. 
A)  is zero, since pollution is not beneficial. 
B)  can be measured as the additional gain to society from one additional unit of pollution. 
C)  is easy to estimate, since polluters are required to file this information in their tax returns. 
D)  is equal to the marginal social cost of pollution, since benefits to producers are equal to costs to consumers.

Question 5

When tradable emissions permits are used, if the demand for goods that produce emissions shifts to the right, the equilibrium price of permits _____ and the equilibrium quantity _____.

Accepted Answer

A)  falls; increases 
B)  increases; stays the same 
C)  falls; falls 
D)  stays the same; increases 
A)  falls; increases 
B)  increases; stays the same 
C)  falls; falls 
D)  stays the same; increases

Question 6

As the quantity of pollution rises, its marginal social cost:

Accepted Answer

A)  remains constant. 
B)  falls. 
C)  rises. 
D)  rises at first but eventually falls. 
A)  remains constant. 
B)  falls. 
C)  rises. 
D)  rises at first but eventually falls.

Question 7

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:

Accepted Answer

A)  zero. 
B)  the level that reduces the marginal social costs of pollution to zero. 
C)  the level at which the marginal social cost is equal to the marginal social benefit. 
D)  the level that minimizes the average total cost of producing the product that generates the pollution. 
A)  zero. 
B)  the level that reduces the marginal social costs of pollution to zero. 
C)  the level at which the marginal social cost is equal to the marginal social benefit. 
D)  the level that minimizes the average total cost of producing the product that generates the pollution.

Question 8

Use the following to answer questions:
Figure: Model of a Competitive Market  
-(Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if there are external costs, a tax imposed on sellers will:

Accepted Answer

A)  decrease the equilibrium quantity. 
B)  increase the equilibrium quantity. 
C)  have no effect on the equilibrium price. 
D)  decrease the equilibrium price. 
A)  decrease the equilibrium quantity. 
B)  increase the equilibrium quantity. 
C)  have no effect on the equilibrium price. 
D)  decrease the equilibrium price.

Question 9

According to the Coase theorem, when negative externalities are present, a market will:

Accepted Answer

A)  always reach an efficient solution. 
B)  reach an efficient solution if transaction costs are low and property rights are well-defined. 
C)  reach an efficient solution only if the government intervenes in the market. 
D)  reach an efficient solution only if the negative externalities are offset by positive externalities. 
A)  always reach an efficient solution. 
B)  reach an efficient solution if transaction costs are low and property rights are well-defined. 
C)  reach an efficient solution only if the government intervenes in the market. 
D)  reach an efficient solution only if the negative externalities are offset by positive externalities.

Question 10

Use the following to answer questions:  
-(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If the government wants to achieve the optimum amount of land for the park, it could use a Pigouvian _____ of _____.

Accepted Answer

A)  tax; $300 
B)  tax; $150 
C)  subsidy; $150 
D)  subsidy; $450 
A)  tax; $300 
B)  tax; $150 
C)  subsidy; $150 
D)  subsidy; $450

Question 11

According to many economists, the government should:

Accepted Answer

A)  reduce the level of carbon emissions as far as possible. 
B)  use its policies to achieve the least-cost reduction of carbon emissions. 
C)  set policy to achieve the efficient level of pollution by reducing the costs of pollution, which will always increase the benefits to society. 
D)  reduce carbon emissions whenever the marginal cost exceeds a predetermined level set by the courts. 
A)  reduce the level of carbon emissions as far as possible. 
B)  use its policies to achieve the least-cost reduction of carbon emissions. 
C)  set policy to achieve the efficient level of pollution by reducing the costs of pollution, which will always increase the benefits to society. 
D)  reduce carbon emissions whenever the marginal cost exceeds a predetermined level set by the courts.

Question 12

If the number of available tradable emissions permits is decreased, the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____.

Accepted Answer

A)  decreases; decreases 
B)  increases; increases 
C)  increases; decreases 
D)  decreases; increases 
A)  decreases; decreases 
B)  increases; increases 
C)  increases; decreases 
D)  decreases; increases

Question 13

The marginal social benefit from pollution _____ as the quantity of pollution emissions _____.

Accepted Answer

A)  remains constant; increases 
B)  decreases; increases 
C)  increases; increases 
D)  remains constant; decreases 
A)  remains constant; increases 
B)  decreases; increases 
C)  increases; increases 
D)  remains constant; decreases

Question 14

The principal government agency in the United States responsible for enforcing national environmental policies is the:

Accepted Answer

A)  Department of Agriculture. 
B)  Department of the Interior. 
C)  Environmental Protection Agency. 
D)  Department of Justice. 
A)  Department of Agriculture. 
B)  Department of the Interior. 
C)  Environmental Protection Agency. 
D)  Department of Justice.

Question 15

Suppose each person in a community had to pay for his or her own education from kindergarten through high school. One would expect that:

Accepted Answer

A)  less education would be acquired, since society has not considered the positive external benefits of education. 
B)  more education would be acquired, since society has not considered the positive external benefits of education. 
C)  the optimal amount of education would be acquired by community members, since they each paid for the amount of education they wanted. 
D)  a Pigouvian tax would ensure the optimal amount of education. 
A)  less education would be acquired, since society has not considered the positive external benefits of education. 
B)  more education would be acquired, since society has not considered the positive external benefits of education. 
C)  the optimal amount of education would be acquired by community members, since they each paid for the amount of education they wanted. 
D)  a Pigouvian tax would ensure the optimal amount of education.

Question 16

Use the following to answer questions:  
-(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. Without government intervention, at the amount of land dedicated to the public park the marginal social benefit will be:

Accepted Answer

A)  $225. 
B)  $150. 
C)  $100. 
D)  $0. 
A)  $225. 
B)  $150. 
C)  $100. 
D)  $0.

Question 17

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

Accepted Answer

A)  society's well-being can be improved if the quantity of pollution decreases. 
B)  firms in the market produce too much pollution. 
C)  firms in the market produce too little pollution. 
D)  firms in the market produce the socially optimal level of pollution. 
A)  society's well-being can be improved if the quantity of pollution decreases. 
B)  firms in the market produce too much pollution. 
C)  firms in the market produce too little pollution. 
D)  firms in the market produce the socially optimal level of pollution.

Question 18

If an emissions tax is too low:

Accepted Answer

A)  there will be too little pollution. 
B)  there will be too much pollution. 
C)  the marginal social cost of pollution will be less than the marginal social benefit of pollution. 
D)  there could be either too much or too little pollution. 
A)  there will be too little pollution. 
B)  there will be too much pollution. 
C)  the marginal social cost of pollution will be less than the marginal social benefit of pollution. 
D)  there could be either too much or too little pollution.

Question 19

If an activity generates external costs, the decision makers generating the activity will:

Accepted Answer

A)  be faced with its full costs. 
B)  be faced with no costs. 
C)  not be faced with its full costs. 
D)  be faced with excessive costs. 
A)  be faced with its full costs. 
B)  be faced with no costs. 
C)  not be faced with its full costs. 
D)  be faced with excessive costs.

If at the current amount of pollution its marginal social benefit is greater than its marginal social cost, then there is too little pollution.

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:

The marginal social benefit of pollution:

When tradable emissions permits are used, if the demand for goods that produce emissions shifts to the right, the equilibrium price of permits _ and the equilibrium quantity _.

As the quantity of pollution rises, its marginal social cost:

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:

Use the following to answer questions: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if there are external costs, a tax imposed on sellers will:

According to the Coase theorem, when negative externalities are present, a market will:

According to many economists, the government should:

If the number of available tradable emissions permits is decreased, the equilibrium price of the permits _ and the equilibrium quantity of emissions _.

The marginal social benefit from pollution _ as the quantity of pollution emissions _.

The principal government agency in the United States responsible for enforcing national environmental policies is the:

Suppose each person in a community had to pay for his or her own education from kindergarten through high school. One would expect that:

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

If an emissions tax is too low:

If an activity generates external costs, the decision makers generating the activity will:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 16: Externalities

If at the current amount of pollution its marginal social benefit is greater than its marginal social cost, then there is too little pollution.

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. In this market, whose sulfur emission is a result of production, an efficient solution is one in which:

The marginal social benefit of pollution:

When tradable emissions permits are used, if the demand for goods that produce emissions shifts to the right, the equilibrium price of permits _____ and the equilibrium quantity _____.

As the quantity of pollution rises, its marginal social cost:

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is:

Use the following to answer questions: Figure: Model of a Competitive Market -(Figure: Model of a Competitive Market) Given the figure Model of a Competitive Market, if there are external costs, a tax imposed on sellers will:

According to the Coase theorem, when negative externalities are present, a market will:

According to many economists, the government should:

If the number of available tradable emissions permits is decreased, the equilibrium price of the permits _____ and the equilibrium quantity of emissions _____.

The marginal social benefit from pollution _____ as the quantity of pollution emissions _____.

The principal government agency in the United States responsible for enforcing national environmental policies is the:

Suppose each person in a community had to pay for his or her own education from kindergarten through high school. One would expect that:

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

If an emissions tax is too low:

If an activity generates external costs, the decision makers generating the activity will:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

When tradable emissions permits are used, if the demand for goods that produce emissions shifts to the right, the equilibrium price of permits _ and the equilibrium quantity _.

If the number of available tradable emissions permits is decreased, the equilibrium price of the permits _ and the equilibrium quantity of emissions _.

The marginal social benefit from pollution _ as the quantity of pollution emissions _.