Question 1

The optimal Pigouvian tax is equal to the marginal social cost of pollution at the socially optimal quantity of pollution.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions:
Figure: MSB and MSC of Pollution  
-(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. What level of pollution represents the socially optimal level?

Accepted Answer

A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4 
A)  Q1 
B)  Q2 
C)  Q3 
D)  Q4

Question 3

The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:

Accepted Answer

A)  emissions taxes. 
B)  environmental standards. 
C)  tradable emissions permits. 
D)  Pigouvian taxes. 
A)  emissions taxes. 
B)  environmental standards. 
C)  tradable emissions permits. 
D)  Pigouvian taxes.

Question 4

Use the following to answer questions:
Figure: City with Two Polluters  
-(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government wants to limit total pollution to 2,200 tons, it could impose an emissions tax of _____ on both firms.

Accepted Answer

A)  $100 
B)  $200 
C)  $300 
D)  $400 
A)  $100 
B)  $200 
C)  $300 
D)  $400

Question 5

Use the following to answer questions:
Figure: Marginal Private Benefits and Marginal Social Benefits  
-(Figure: Marginal Private Benefits and Marginal Social Benefits) Look at the figure Marginal Private Benefits and Marginal Social Benefits. One way for the government to achieve this socially optimal level is by:

Accepted Answer

A)  imposing a per-unit tax equal to P1 - P2. 
B)  providing a per-unit subsidy of P0 - P2. 
C)  mandating consumption at output level Q1. 
D)  leaving the quantity at the initial private market-clearing quantity and price. 
A)  imposing a per-unit tax equal to P1 - P2. 
B)  providing a per-unit subsidy of P0 - P2. 
C)  mandating consumption at output level Q1. 
D)  leaving the quantity at the initial private market-clearing quantity and price.

Question 6

If at the current amount of pollution, its marginal social benefit is greater than its marginal social cost:

Accepted Answer

A)  there is too little pollution. 
B)  there is too much pollution. 
C)  society is achieving the optimal amount of pollution. 
D)  the externality is minimized. 
A)  there is too little pollution. 
B)  there is too much pollution. 
C)  society is achieving the optimal amount of pollution. 
D)  the externality is minimized.

Question 7

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog, then at the equilibrium price and quantity of hogs:

Accepted Answer

A)  too few hogs will be raised. 
B)  the price will be less than the marginal social cost. 
C)  the price will be less than the marginal social benefit. 
D)  the price will be less than the marginal cost to hog farmers. 
A)  too few hogs will be raised. 
B)  the price will be less than the marginal social cost. 
C)  the price will be less than the marginal social benefit. 
D)  the price will be less than the marginal cost to hog farmers.

Question 8

Brad and Angelina are neighbors. Brad never mows his yard, rakes his leaves, or trims his hedges. His overgrown yard not only is an eyesore, it is pulling down the value of Angelina's house. How could the Coase theorem be used to remedy this negative externality? Does it matter whether Brad has the right to ignore his yard or Angelina has the right to force him to clean it up?

Accepted Answer

Angelina's property values are being hur

Question 9

Use the following to answer questions:  
-(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the market-determined quantity of pollution, the marginal social benefit of pollution is:

Accepted Answer

A)  $800. 
B)  $400. 
C)  $200. 
D)  $0. 
A)  $800. 
B)  $400. 
C)  $200. 
D)  $0.

Question 10

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee, assuming that the government does not intervene in the marketplace.

Accepted Answer

A) True 
 B)False

Question 11

When individuals take external costs and benefits into account:

Accepted Answer

A)  there are no external costs. 
B)  they internalize the externality. 
C)  the government should intervene in the market. 
D)  the market will not reach an efficient solution. 
A)  there are no external costs. 
B)  they internalize the externality. 
C)  the government should intervene in the market. 
D)  the market will not reach an efficient solution.

Question 12

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

Accepted Answer

A)  firms in the market produce the socially optimal level of pollution. 
B)  society's well-being cannot be improved by changing the quantity of pollution. 
C)  firms in the market produce too much pollution. 
D)  firms in the market produce too little pollution. 
A)  firms in the market produce the socially optimal level of pollution. 
B)  society's well-being cannot be improved by changing the quantity of pollution. 
C)  firms in the market produce too much pollution. 
D)  firms in the market produce too little pollution.

Question 13

Use the following to answer questions:
Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and external benefits. They determine that the marginal private benefit (MPB) of lawns can be represented by the equation MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is represented by the equation MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep.
-(Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. How many hours of lawn upkeep will occur in this community, and what will be the marginal private benefit of such upkeep?

Accepted Answer

A)  50 hours; $50 
B)  45 hours; $20 
C)  50 hours; $25 
D)  100 hours; $50 
A)  50 hours; $50 
B)  45 hours; $20 
C)  50 hours; $25 
D)  100 hours; $50

Question 14

Activities that generate external costs will likely be carried out at levels that _____ those that would be efficient.

Accepted Answer

A)  are equal to 
B)  are less than 
C)  exceed 
D)  compete with 
A)  are equal to 
B)  are less than 
C)  exceed 
D)  compete with

Question 15

Use the following to answer questions:
Figure: Efficiency and Pollution  
-(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. In the absence of government intervention, the amount of pollution will be _____ tons.

Accepted Answer

A)  20 
B)  30 
C)  40 
D)  45 
A)  20 
B)  30 
C)  40 
D)  45

Question 16

Use the following to answer questions:  
-(Table: Externalities from Parks) The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 5 acres is dedicated to the park, the park is:

Accepted Answer

A)  too large. 
B)  the socially optimum size. 
C)  too small. 
D)  the efficient size. 
A)  too large. 
B)  the socially optimum size. 
C)  too small. 
D)  the efficient size.

Question 17

Use the following to answer questions:  
-(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 2 tons of pollution is produced, the outcome is _____ because _____.

Accepted Answer

A) efficient; MSB = MSC B) efficient; MSB > MSC C) inefficient; MSB > MSC D) inefficient; MSB < MSC A) efficient; MSB = MSC B) efficient; MSB > MSC C) inefficient; MSB > MSC D) inefficient; MSB < MSC

Question 18

Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500 but government officials have set the tax at $500. At the equilibrium with the $500 tax:

Accepted Answer

A)  there will be too much pollution. 
B)  the marginal social cost of pollution will be less than $500. 
C)  the marginal social benefit of pollution will be less than $500. 
D)  the marginal social benefit of pollution will be more than $500. 
A)  there will be too much pollution. 
B)  the marginal social cost of pollution will be less than $500. 
C)  the marginal social benefit of pollution will be less than $500. 
D)  the marginal social benefit of pollution will be more than $500.

Question 19

The efficient quantity of pollution emissions occurs where:

Accepted Answer

A)  there is absolutely no damage done to a pristine environment. 
B)  government forces zero pollution to occur, no matter what the cost. 
C)  the marginal social benefits of pollution exceed the marginal social costs of pollution. 
D)  the marginal social benefit of pollution is equal to the marginal social cost of pollution. 
A)  there is absolutely no damage done to a pristine environment. 
B)  government forces zero pollution to occur, no matter what the cost. 
C)  the marginal social benefits of pollution exceed the marginal social costs of pollution. 
D)  the marginal social benefit of pollution is equal to the marginal social cost of pollution.

Question 20

Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment. This is:

Accepted Answer

A)  an emissions tax. 
B)  the Coase theorem. 
C)  a tradable emissions permit. 
D)  an environmental standard. 
A)  an emissions tax. 
B)  the Coase theorem. 
C)  a tradable emissions permit. 
D)  an environmental standard.

The optimal Pigouvian tax is equal to the marginal social cost of pollution at the socially optimal quantity of pollution.

Use the following to answer questions: Figure: MSB and MSC of Pollution -(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. What level of pollution represents the socially optimal level?

The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:

Use the following to answer questions: Figure: City with Two Polluters -(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government wants to limit total pollution to 2,200 tons, it could impose an emissions tax of _____ on both firms.

If at the current amount of pollution, its marginal social benefit is greater than its marginal social cost:

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog, then at the equilibrium price and quantity of hogs:

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the market-determined quantity of pollution, the marginal social benefit of pollution is:

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee, assuming that the government does not intervene in the marketplace.

When individuals take external costs and benefits into account:

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

Activities that generate external costs will likely be carried out at levels that _____ those that would be efficient.

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. In the absence of government intervention, the amount of pollution will be _____ tons.

Use the following to answer questions: -(Table: Externalities from Parks) The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 5 acres is dedicated to the park, the park is:

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 2 tons of pollution is produced, the outcome is _ because _.

Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500 but government officials have set the tax at $500. At the equilibrium with the $500 tax:

The efficient quantity of pollution emissions occurs where:

Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment. This is:

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

The optimal Pigouvian tax is equal to the marginal social cost of pollution at the socially optimal quantity of pollution.

Use the following to answer questions: Figure: MSB and MSC of Pollution -(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. What level of pollution represents the socially optimal level?

The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:

Use the following to answer questions: Figure: City with Two Polluters -(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the government wants to limit total pollution to 2,200 tons, it could impose an emissions tax of _____ on both firms.

If at the current amount of pollution, its marginal social benefit is greater than its marginal social cost:

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. If the marginal external cost is $100 per hog and the government imposes a tax of $200 per hog, then at the equilibrium price and quantity of hogs:

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. At the market-determined quantity of pollution, the marginal social benefit of pollution is:

The total external cost of air pollution in Tennessee affects the final price of goods in Tennessee, assuming that the government does not intervene in the marketplace.

When individuals take external costs and benefits into account:

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

Activities that generate external costs will likely be carried out at levels that _____ those that would be efficient.

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. In the absence of government intervention, the amount of pollution will be _____ tons.

Use the following to answer questions: -(Table: Externalities from Parks) The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. If 5 acres is dedicated to the park, the park is:

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 2 tons of pollution is produced, the outcome is _____ because _____.

Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $1,500 but government officials have set the tax at $500. At the equilibrium with the $500 tax:

The efficient quantity of pollution emissions occurs where:

Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment. This is:

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

Use the following to answer questions: -(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and cost of various amounts of pollution from a coal mine. If 2 tons of pollution is produced, the outcome is _ because _.