Question 1

If the marginal social benefit received from pollution is less than its marginal social cost:

Accepted Answer

A)  society's well-being can be improved if the quantity of pollution increases. 
B)  society's well-being can be improved if the quantity of pollution decreases. 
C)  society has achieved its socially optimal level of pollution. 
D)  the market is producing too little pollution. 
A)  society's well-being can be improved if the quantity of pollution increases. 
B)  society's well-being can be improved if the quantity of pollution decreases. 
C)  society has achieved its socially optimal level of pollution. 
D)  the market is producing too little pollution.

Question 2

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, too much pollution is found when the price is _____ and the quantity is _____.

Accepted Answer

A)  $5; 15 
B)  $5; 40 
C)  $25; 20 
D)  $5; 30 
A)  $5; 15 
B)  $5; 40 
C)  $25; 20 
D)  $5; 30

Question 3

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 efficient quantity of pollution the marginal social benefit of pollution is:

Accepted Answer

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

Question 4

Which of the following is an environmental standard?

Accepted Answer

A)  tradable pollution permits 
B)  taxes on the level of pollution 
C)  legal limits on sulfur dioxide emissions 
D)  production subsidies 
A)  tradable pollution permits 
B)  taxes on the level of pollution 
C)  legal limits on sulfur dioxide emissions 
D)  production subsidies

Question 5

Use the following to answer questions:
Figure: Efficiency and Pollution  
-(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. A Pigouvian tax of $10 will result in a quantity of pollution for which the:

Accepted Answer

A)  marginal social benefit is less than the marginal social cost. 
B)  marginal social benefit exceeds the marginal social cost. 
C)  marginal social benefit equals the marginal social cost. 
D)  resources are allocated efficiently. 
A)  marginal social benefit is less than the marginal social cost. 
B)  marginal social benefit exceeds the marginal social cost. 
C)  marginal social benefit equals the marginal social cost. 
D)  resources are allocated efficiently.

Question 6

A negative externality:

Accepted Answer

A)  is any cost above the economic cost. 
B)  equals the social cost plus the firm's private cost. 
C)  is an uncompensated cost imposed by an individual or firm on others. 
D)  equals the opportunity cost minus the social costs. 
A)  is any cost above the economic cost. 
B)  equals the social cost plus the firm's private cost. 
C)  is an uncompensated cost imposed by an individual or firm on others. 
D)  equals the opportunity cost minus the social costs.

Question 7

There are benefits resulting indirectly from pollution because:

Accepted Answer

A)  we obtain goods and services we enjoy even though in the process we pollute. 
B)  firms pollute the environment only if it allows them to provide people with goods and services they desire at a higher cost. 
C)  businesses and consumers receive a perverse satisfaction from polluting. 
D)  it can often be beneficial to wildlife. 
A)  we obtain goods and services we enjoy even though in the process we pollute. 
B)  firms pollute the environment only if it allows them to provide people with goods and services they desire at a higher cost. 
C)  businesses and consumers receive a perverse satisfaction from polluting. 
D)  it can often be beneficial to wildlife.

Question 8

What is meant by a positive externality? Use an example to assist your explanation.

Accepted Answer

A positive externality is the production

Question 9

Use the following to answer questions:
Figure: Pollution and Efficiency  
-(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _____ units of emissions, then _____.

Accepted Answer

A)  30; it would be efficient 
B)  30; MSB > MSC 
C)  45; total cost would equal total benefits 
D)  45; MSC = 0 
A)  30; it would be efficient 
B)  30; MSB > MSC 
C)  45; total cost would equal total benefits 
D)  45; MSC = 0

Question 10

Taxes on sulfur dioxide emissions, excise taxes on gas, and sales taxes are all examples of Pigouvian taxes.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes tradable emissions permits?

Accepted Answer

A)  tax system for internalizing emission costs to the market 
B)  subsidy system for encouraging production of goods with positive externalities 
C)  system of voluntary negotiations between polluters and damaged parties 
D)  licenses that can be bought and sold and that enable the holder to pollute up to a specified amount during a given period 
A)  tax system for internalizing emission costs to the market 
B)  subsidy system for encouraging production of goods with positive externalities 
C)  system of voluntary negotiations between polluters and damaged parties 
D)  licenses that can be bought and sold and that enable the holder to pollute up to a specified amount during a given period

Question 12

To encourage consumption of a good that generates positive externalities, the best option for policymakers would be to:

Accepted Answer

A)  impose a tax on the amount consumed to achieve the socially optimal level. 
B)  mandate consumption of the good at the socially optimal level. 
C)  provide a subsidy per unit of the good consumed to achieve the socially optimal level. 
D)  do nothing, since the market will achieve the socially optimal level without government intervention. 
A)  impose a tax on the amount consumed to achieve the socially optimal level. 
B)  mandate consumption of the good at the socially optimal level. 
C)  provide a subsidy per unit of the good consumed to achieve the socially optimal level. 
D)  do nothing, since the market will achieve the socially optimal level without government intervention.

Question 13

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

Accepted Answer

A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  remains unchanged; goes up or down 
A)  decreases; increases 
B)  increases; increases 
C)  decreases; decreases 
D)  remains unchanged; goes up or down

Question 14

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. At the socially optimum 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 15

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. If government does intervene and encourages the market to produce and price at the socially optimal level, what will be the output and price?

Accepted Answer

A)  Q0; P0 
B)  Q1; P0 
C)  Q1; P2 
D)  Q2; P1 
A)  Q0; P0 
B)  Q1; P0 
C)  Q1; P2 
D)  Q2; P1

Question 16

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:

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 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 benefit. 
D)  the price will be less than the marginal cost to hog farmers.

Question 17

An emissions tax will:

Accepted Answer

A)  ensure that the marginal benefit of pollution is equal for all sources of pollution. 
B)  set standards to which all producers must adhere regardless of their production costs. 
C)  cause all polluters to reduce emissions by the same amount. 
D)  increase pollution, but not in the most efficient cost-saving way. 
A)  ensure that the marginal benefit of pollution is equal for all sources of pollution. 
B)  set standards to which all producers must adhere regardless of their production costs. 
C)  cause all polluters to reduce emissions by the same amount. 
D)  increase pollution, but not in the most efficient cost-saving way.

Question 18

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 cost of pollution is:

Accepted Answer

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

Question 19

Use the following to answer questions:
Figure: Efficiency and Pollution  
-(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

Accepted Answer

A)  a socially optimal quantity of pollution. 
B)  too little pollution, because its marginal social benefit would exceed its marginal social cost. 
C)  too much pollution, because its marginal social cost would exceed its marginal social benefit. 
D)  too much pollution, because any pollution is too much from an economist's perspective. 
A)  a socially optimal quantity of pollution. 
B)  too little pollution, because its marginal social benefit would exceed its marginal social cost. 
C)  too much pollution, because its marginal social cost would exceed its marginal social benefit. 
D)  too much pollution, because any pollution is too much from an economist's perspective.

Question 20

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. The community decides that given all the benefits of lawn upkeep, it is important to maintain the socially optimal number of lawn upkeep hours. To achieve this, the community will:

Accepted Answer

A)  require community lawn service of 45 hours. 
B)  subsidize everyone who contributes to lawn upkeep with a payment of $15. 
C)  implement a Pigouvian lawn tax of $65. 
D)  provide no additional funds to lawn upkeep. 
A)  require community lawn service of 45 hours. 
B)  subsidize everyone who contributes to lawn upkeep with a payment of $15. 
C)  implement a Pigouvian lawn tax of $65. 
D)  provide no additional funds to lawn upkeep.

If the marginal social benefit received from pollution is less than its marginal social cost:

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, too much pollution is found when the price is _ and the quantity 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. At the efficient quantity of pollution the marginal social benefit of pollution is:

Which of the following is an environmental standard?

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. A Pigouvian tax of $10 will result in a quantity of pollution for which the:

A negative externality:

There are benefits resulting indirectly from pollution because:

What is meant by a positive externality? Use an example to assist your explanation.

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _ units of emissions, then _.

Taxes on sulfur dioxide emissions, excise taxes on gas, and sales taxes are all examples of Pigouvian taxes.

Which of the following best describes tradable emissions permits?

To encourage consumption of a good that generates positive externalities, the best option for policymakers would be to:

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

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:

An emissions tax will:

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 cost of pollution is:

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

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 the marginal social benefit received from pollution is less than its marginal social cost:

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, too much pollution is found when the price is _____ and the quantity 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. At the efficient quantity of pollution the marginal social benefit of pollution is:

Which of the following is an environmental standard?

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. A Pigouvian tax of $10 will result in a quantity of pollution for which the:

A negative externality:

There are benefits resulting indirectly from pollution because:

What is meant by a positive externality? Use an example to assist your explanation.

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _____ units of emissions, then _____.

Taxes on sulfur dioxide emissions, excise taxes on gas, and sales taxes are all examples of Pigouvian taxes.

Which of the following best describes tradable emissions permits?

To encourage consumption of a good that generates positive externalities, the best option for policymakers would be to:

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

When farmers raise hogs, there are a number of external costs. In particular, hogs generate methane gas. Without government regulation, the equilibrium price and quantity of pigs raised means that:

An emissions tax will:

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 cost of pollution is:

Use the following to answer questions: Figure: Efficiency and Pollution -(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

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: 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, too much pollution is found when the price is _ and the quantity is _.

Use the following to answer questions: Figure: Pollution and Efficiency -(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this market, whose sulfur emission is a result of production, produced _ units of emissions, then _.

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