Question 1

Car owners in some metropolitan areas must subject their vehicles to annual emissions testing while car owners in rural areas do not. Why might this be socially optimal?

Accepted Answer

Rural areas are sparsely populated and t

Question 2

When does a negative externality exist?

Accepted Answer

A)  whenever marginal social cost exceed marginal private costs 
B)  whenever marginal social costs exceed marginal social benefits 
C)  whenever marginal social benefits exceed marginal private benefits 
D)  whenever marginal private costs exceed marginal private benefits 
A)  whenever marginal social cost exceed marginal private costs 
B)  whenever marginal social costs exceed marginal social benefits 
C)  whenever marginal social benefits exceed marginal private benefits 
D)  whenever marginal private costs exceed marginal private benefits

Question 3

What is an advantage of using a transferable pollution right over a pollution tax?

Accepted Answer

A)  The government can legislate the method of abatement. 
B)  The government receives less revenue from the tax. 
C)  Consumer prices won't rise. 
D)  Governments don't need information on the cheapest abatement strategy. 
A)  The government can legislate the method of abatement. 
B)  The government receives less revenue from the tax. 
C)  Consumer prices won't rise. 
D)  Governments don't need information on the cheapest abatement strategy.

Question 4

The Coase theorem suggests that a private transaction can compensate for an externality when private property rights exist. In practice, why doesn't it work when large numbers of people are involved?

Accepted Answer

A)  because marginal costs are higher than marginal benefits 
B)  because too many politicians get involved 
C)  because marginal benefits are higher than marginal costs 
D)  because transaction costs are too high 
A)  because marginal costs are higher than marginal benefits 
B)  because too many politicians get involved 
C)  because marginal benefits are higher than marginal costs 
D)  because transaction costs are too high

Question 5

FIGURE 12-3
  
-Refer to Figure 12-3, which represents the market for pulp, the production of which creates dioxin emissions. Suppose the market is currently producing at the profit maximizing point and the government wishes to impose a tax to correct the overallocation of resources caused by the externality. Once the tax is imposed, what will the per unit price of pulp be?

Accepted Answer

A)  $110 
B)  $150 
C)  $165 
D)  $190 
A)  $110 
B)  $150 
C)  $165 
D)  $190

Question 6

The presence of a negative externality such as pollution causes an underallocation of resources.

Accepted Answer

A) True 
 B)False

Question 7

In the last 30 years, what has happened to environmental legislation and pollution levels?

Accepted Answer

A)  Legislation has been getting weaker, and pollution levels have been getting higher. 
B)  Legislation has been getting tougher, and pollution levels have been getting lower. 
C)  Legislation has been getting tougher, and pollution levels have been getting higher. 
D)  Legislation has been getting weaker, and pollution levels have been getting lower. 
A)  Legislation has been getting weaker, and pollution levels have been getting higher. 
B)  Legislation has been getting tougher, and pollution levels have been getting lower. 
C)  Legislation has been getting tougher, and pollution levels have been getting higher. 
D)  Legislation has been getting weaker, and pollution levels have been getting lower.

Question 8

Governments should always attempt to solve externality problems that cannot be solved through private actions.

Accepted Answer

A) True 
 B)False

Question 9

Intervention when a negative externality exists can move the market output closer to the socially optimal level and reduce the size of the deadweight loss.

Accepted Answer

A) True 
 B)False

Question 10

The Province of Ontario has recently banned the use of cellular telephones in automobiles. Do cellular phones create a negative externality?

Accepted Answer

There are arguments for and against. Ans

Question 11

FIGURE 12-2
  
-Refer to Figure 12-2, which represents the costs and benefits of pollution control. What is the optimal amount of spending on pollution control?

Accepted Answer

A)  P3Q1 
B)  P1Q1 
C)  P3Q3 
D)  P2Q2 
A)  P3Q1 
B)  P1Q1 
C)  P3Q3 
D)  P2Q2

Question 12

FIGURE 12-1
  
-Refer to Figure 12-1, which represents a hypothetical market for steel. What represents the price and output combination that the industry would produce?

Accepted Answer

A)  OG; OE 
B)  OH; OD 
C)  OG; OD 
D)  OF; OD 
A)  OG; OE 
B)  OH; OD 
C)  OG; OD 
D)  OF; OD

Question 13

Which of the following best describes the impact of increased concerns regarding the environment and climate change?

Accepted Answer

A)  It has likely caused the marginal social cost curve to shift to the right. 
B)  It has likely caused the marginal social benefit curve to shift to the right. 
C)  It has likely caused the marginal social cost curve to shift to the left. 
D)  It has likely caused the marginal social benefit curve to shift to the left. 
A)  It has likely caused the marginal social cost curve to shift to the right. 
B)  It has likely caused the marginal social benefit curve to shift to the right. 
C)  It has likely caused the marginal social cost curve to shift to the left. 
D)  It has likely caused the marginal social benefit curve to shift to the left.

Question 14

Why might zero pollution NOT be the optimal objective?

Accepted Answer

A)  It is difficult to determine which firms are doing the polluting. 
B)  There is no marginal benefit to a clean environment. 
C)  A clean environment comes with an opportunity cost. 
D)  Some people may not be affected by the pollution. 
A)  It is difficult to determine which firms are doing the polluting. 
B)  There is no marginal benefit to a clean environment. 
C)  A clean environment comes with an opportunity cost. 
D)  Some people may not be affected by the pollution.

Question 15

Why are negative externalities difficult to measure in practice?

Accepted Answer

A)  because most external costs are nonpecuniary in nature 
B)  because the marginal value of cleaner air is close to zero 
C)  because the effects of pollution are subjective in nature 
D)  because some resources are owned by society and therefore have no opportunity cost 
A)  because most external costs are nonpecuniary in nature 
B)  because the marginal value of cleaner air is close to zero 
C)  because the effects of pollution are subjective in nature 
D)  because some resources are owned by society and therefore have no opportunity cost

Question 16

The government must determine the optimal method of reducing pollution when transferable pollution rights are implemented.

Accepted Answer

A) True 
 B)False

Question 17

FIGURE 12-1
  
-Refer to Figure 12-1, which represents a hypothetical market for steel. At the private market output level, what is the deadweight loss associated with the overallocation of resources equal to?

Accepted Answer

A)  ABGH 
B)  FHAC 
C)  ACB 
D)  OHAD 
A)  ABGH 
B)  FHAC 
C)  ACB 
D)  OHAD

Question 18

The Coase theorem suggests that the optimal solution to pollution may be independent of the initial property rights.

Accepted Answer

A) True 
 B)False

Question 19

What is environmental damage, as a market failure, caused by?

Accepted Answer

A)  the absence of prices for the use of the atmosphere and waterways 
B)  firms' relentless pursuit of profits 
C)  apathy on the part of consumers 
D)  globalization 
A)  the absence of prices for the use of the atmosphere and waterways 
B)  firms' relentless pursuit of profits 
C)  apathy on the part of consumers 
D)  globalization

Question 20

Which of the following firms is most likely to be the first to implement pollution control technologies if the government implements a system of transferable pollution rights?

Accepted Answer

A)  the firm with the lowest marginal cost of production 
B)  the firm with the lowest marginal cost of implementation 
C)  the firm with the lowest level of pollution 
D)  the firm with the highest level of pollution 
A)  the firm with the lowest marginal cost of production 
B)  the firm with the lowest marginal cost of implementation 
C)  the firm with the lowest level of pollution 
D)  the firm with the highest level of pollution

Car owners in some metropolitan areas must subject their vehicles to annual emissions testing while car owners in rural areas do not. Why might this be socially optimal?

When does a negative externality exist?

What is an advantage of using a transferable pollution right over a pollution tax?

The Coase theorem suggests that a private transaction can compensate for an externality when private property rights exist. In practice, why doesn't it work when large numbers of people are involved?

The presence of a negative externality such as pollution causes an underallocation of resources.

In the last 30 years, what has happened to environmental legislation and pollution levels?

Governments should always attempt to solve externality problems that cannot be solved through private actions.

Intervention when a negative externality exists can move the market output closer to the socially optimal level and reduce the size of the deadweight loss.

The Province of Ontario has recently banned the use of cellular telephones in automobiles. Do cellular phones create a negative externality?

FIGURE 12-2 -Refer to Figure 12-2, which represents the costs and benefits of pollution control. What is the optimal amount of spending on pollution control?

FIGURE 12-1 -Refer to Figure 12-1, which represents a hypothetical market for steel. What represents the price and output combination that the industry would produce?

Which of the following best describes the impact of increased concerns regarding the environment and climate change?

Why might zero pollution NOT be the optimal objective?

Why are negative externalities difficult to measure in practice?

The government must determine the optimal method of reducing pollution when transferable pollution rights are implemented.

FIGURE 12-1 -Refer to Figure 12-1, which represents a hypothetical market for steel. At the private market output level, what is the deadweight loss associated with the overallocation of resources equal to?

The Coase theorem suggests that the optimal solution to pollution may be independent of the initial property rights.

What is environmental damage, as a market failure, caused by?

Which of the following firms is most likely to be the first to implement pollution control technologies if the government implements a system of transferable pollution rights?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

Filters

Exam 12: The Environment

Car owners in some metropolitan areas must subject their vehicles to annual emissions testing while car owners in rural areas do not. Why might this be socially optimal?

When does a negative externality exist?

What is an advantage of using a transferable pollution right over a pollution tax?

The Coase theorem suggests that a private transaction can compensate for an externality when private property rights exist. In practice, why doesn't it work when large numbers of people are involved?

The presence of a negative externality such as pollution causes an underallocation of resources.

In the last 30 years, what has happened to environmental legislation and pollution levels?

Governments should always attempt to solve externality problems that cannot be solved through private actions.

Intervention when a negative externality exists can move the market output closer to the socially optimal level and reduce the size of the deadweight loss.

The Province of Ontario has recently banned the use of cellular telephones in automobiles. Do cellular phones create a negative externality?

FIGURE 12-2 -Refer to Figure 12-2, which represents the costs and benefits of pollution control. What is the optimal amount of spending on pollution control?

FIGURE 12-1 -Refer to Figure 12-1, which represents a hypothetical market for steel. What represents the price and output combination that the industry would produce?

Which of the following best describes the impact of increased concerns regarding the environment and climate change?

Why might zero pollution NOT be the optimal objective?

Why are negative externalities difficult to measure in practice?

The government must determine the optimal method of reducing pollution when transferable pollution rights are implemented.

FIGURE 12-1 -Refer to Figure 12-1, which represents a hypothetical market for steel. At the private market output level, what is the deadweight loss associated with the overallocation of resources equal to?

The Coase theorem suggests that the optimal solution to pollution may be independent of the initial property rights.

What is environmental damage, as a market failure, caused by?

Which of the following firms is most likely to be the first to implement pollution control technologies if the government implements a system of transferable pollution rights?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

Filters