Question 1

Cleaning an environment may lead to

Accepted Answer

A)  less production. 
B)  higher prices. 
C)  lower incomes. 
D)  all of the above. 
A)  less production. 
B)  higher prices. 
C)  lower incomes. 
D)  all of the above.

Question 2

Which of the following has also been called the command and control approach?

Accepted Answer

A)  Direct controls 
B)  Voluntary compliance 
C)  Tradable emissions permits 
D)  Taxes on pollution 
A)  Direct controls 
B)  Voluntary compliance 
C)  Tradable emissions permits 
D)  Taxes on pollution

Question 3

Voluntarism includes methods for dealing with pollution that

Accepted Answer

A)  carry no legal authority. 
B)  call the problems of pollution to the public's attention. 
C)  involve trying to persuade polluters to reduce or eliminate pollution voluntarily. 
D)  include all of the above. 
A)  carry no legal authority. 
B)  call the problems of pollution to the public's attention. 
C)  involve trying to persuade polluters to reduce or eliminate pollution voluntarily. 
D)  include all of the above.

Question 4

An advantage emission taxes and permits have over direct controls is that the former

Accepted Answer

A)  work well even if pollution output cannot be accurately measured. 
B)  can respond quickly to new information about the dangers of particular pollutants. 
C)  make it in firms' interests to reduce pollution in the most efficient manner possible. 
D)  reduce pollution to zero. 
A)  work well even if pollution output cannot be accurately measured. 
B)  can respond quickly to new information about the dangers of particular pollutants. 
C)  make it in firms' interests to reduce pollution in the most efficient manner possible. 
D)  reduce pollution to zero.

Question 5

Emissions permits allow polluters to pay for the right to pollute a specified amount.

Accepted Answer

A) True 
 B)False

Question 6

If coal prices are rising faster than the rate of interest, then

Accepted Answer

A)  investors should buy coal instead of bonds. 
B)  investors should buy bonds instead of coal. 
C)  coal prices should be expected to fall. 
D)  bond prices should be expected to rise. 
A)  investors should buy coal instead of bonds. 
B)  investors should buy bonds instead of coal. 
C)  coal prices should be expected to fall. 
D)  bond prices should be expected to rise.

Question 7

Rising prices for a natural resource stimulate

Accepted Answer

A)  the development of complements for the resource. 
B)  the development of substitutes for the resource. 
C)  the development of externalities from the resource. 
D)  All of the above are correct. 
A)  the development of complements for the resource. 
B)  the development of substitutes for the resource. 
C)  the development of externalities from the resource. 
D)  All of the above are correct.

Question 8

Unexpected discoveries of mineral reserves will ordinarily cause the price of these minerals to increase.

Accepted Answer

A) True 
 B)False

Question 9

The cause of the "greenhouse effect" is the

Accepted Answer

A)  increasing use of glass in construction. 
B)  growth of desertification. 
C)  burning of "fossil fuels." 
D)  decline in carbon dioxide in the atmosphere. 
A)  increasing use of glass in construction. 
B)  growth of desertification. 
C)  burning of "fossil fuels." 
D)  decline in carbon dioxide in the atmosphere.

Question 10

Direct controls work if

Accepted Answer

A)  there is vigilance and enthusiasm in enforcement by the regulatory agency. 
B)  speed and rigor are used in the court system in prosecuting cases. 
C)  there are significant penalties imposed by the legal system. 
D)  All of the above occur. 
A)  there is vigilance and enthusiasm in enforcement by the regulatory agency. 
B)  speed and rigor are used in the court system in prosecuting cases. 
C)  there are significant penalties imposed by the legal system. 
D)  All of the above occur.

Question 11

During the second Bush administration, environmental fines and prosecutions

Accepted Answer

A)  increased rapidly. 
B)  declined severely. 
C)  grew with the rate of inflation. 
D)  declined slightly from earlier levels. 
A)  increased rapidly. 
B)  declined severely. 
C)  grew with the rate of inflation. 
D)  declined slightly from earlier levels.

Question 12

Environmental problems occur exclusively in capitalist economies.

Accepted Answer

A) True 
 B)False

Question 13

In a free market for depletable natural resources, any shortage where there is an excess of quantity demanded over quantity supplied must be

Accepted Answer

A)  expected as a matter of course. 
B)  due to a price floor. 
C)  the result of discovery of new deposits of the resources. 
D)  artificial. 
A)  expected as a matter of course. 
B)  due to a price floor. 
C)  the result of discovery of new deposits of the resources. 
D)  artificial.

Question 14

The supply curve of a depletable natural resource is usually

Accepted Answer

A)  downward sloping because the resource runs out over time. 
B)  upward sloping because more of the resource can be profitably extracted at higher prices. 
C)  upward sloping because the price of the resource rises over time. 
D)  vertical because the supply of the resource is fixed. 
A)  downward sloping because the resource runs out over time. 
B)  upward sloping because more of the resource can be profitably extracted at higher prices. 
C)  upward sloping because the price of the resource rises over time. 
D)  vertical because the supply of the resource is fixed.

Question 15

Direct controls have a clear advantage where

Accepted Answer

A)  an emission is so dangerous that it is prohibited altogether. 
B)  a sudden change in circumstances calls for prompt and substantial change in conduct. 
C)  effective and dependable metering devices have not been invented or are prohibitively costly to install and operate. 
D)  All of the above create an advantage. 
A)  an emission is so dangerous that it is prohibited altogether. 
B)  a sudden change in circumstances calls for prompt and substantial change in conduct. 
C)  effective and dependable metering devices have not been invented or are prohibitively costly to install and operate. 
D)  All of the above create an advantage.

Question 16

Which of the following is an advantage to the pollution-rights approach to environmental quality?

Accepted Answer

A)  Polluters are compelled to clean up completely. 
B)  Polluters have appropriate incentives to clean up. 
C)  This is a method of direct government regulation. 
D)  Compliance with legal guidelines is discretionary. 
A)  Polluters are compelled to clean up completely. 
B)  Polluters have appropriate incentives to clean up. 
C)  This is a method of direct government regulation. 
D)  Compliance with legal guidelines is discretionary.

Question 17

The supply curve of a natural resource like oil has a positive slope because

Accepted Answer

A)  the supply becomes closer to exhaustion as demand rises. 
B)  it becomes more costly to find and develop supplies as demand rises. 
C)  rents rise as output increases. 
D)  indirect taxes rise with output. 
A)  the supply becomes closer to exhaustion as demand rises. 
B)  it becomes more costly to find and develop supplies as demand rises. 
C)  rents rise as output increases. 
D)  indirect taxes rise with output.

Question 18

Direct controls have a clear advantage when a total ban is necessary.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels.The most successful policy in this case would be

Accepted Answer

A)  direct controls to limit driving. 
B)  taxes on drivers at rush hours. 
C)  voluntary cooperation to reduce driving. 
D)  removal of autos with excessive emissions. 
A)  direct controls to limit driving. 
B)  taxes on drivers at rush hours. 
C)  voluntary cooperation to reduce driving. 
D)  removal of autos with excessive emissions.

Question 20

Economists generally prefer to deal with emissions of pollutants

Accepted Answer

A)  with direct controls. 
B)  by encouraging people not to pollute. 
C)  by subsidizing the installation of pollution-control equipment. 
D)  by taxing emissions. 
A)  with direct controls. 
B)  by encouraging people not to pollute. 
C)  by subsidizing the installation of pollution-control equipment. 
D)  by taxing emissions.

Exam 17: Externalities, the Environment, and Natural Resources

Cleaning an environment may lead to

Which of the following has also been called the command and control approach?

Voluntarism includes methods for dealing with pollution that

An advantage emission taxes and permits have over direct controls is that the former

Emissions permits allow polluters to pay for the right to pollute a specified amount.

If coal prices are rising faster than the rate of interest, then

Rising prices for a natural resource stimulate

Unexpected discoveries of mineral reserves will ordinarily cause the price of these minerals to increase.

The cause of the "greenhouse effect" is the

Direct controls work if

During the second Bush administration, environmental fines and prosecutions

Environmental problems occur exclusively in capitalist economies.

In a free market for depletable natural resources, any shortage where there is an excess of quantity demanded over quantity supplied must be

The supply curve of a depletable natural resource is usually

Direct controls have a clear advantage where

Which of the following is an advantage to the pollution-rights approach to environmental quality?

The supply curve of a natural resource like oil has a positive slope because

Direct controls have a clear advantage when a total ban is necessary.

Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels.The most successful policy in this case would be

Economists generally prefer to deal with emissions of pollutants

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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