Question 1

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

Accepted Answer

A)  social welfare is maximized. 
B)  the good is overproduced and the market is inefficient. 
C)  firms are earning zero profits. 
D)  all externalities have been eliminated. 
A)  social welfare is maximized. 
B)  the good is overproduced and the market is inefficient. 
C)  firms are earning zero profits. 
D)  all externalities have been eliminated.

Question 2

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following  best describes this situation?

Accepted Answer

A)  The environmentally friendly firm will be operating at a lower marginal and average cost than those firms that shift some costs to society in the form of external costs. 
B)  In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit. 
C)  Without regulations requiring firms to internalize their external costs, environmentally friendly producers will earn positive economic profits even without consumers paying them a higher price than standard producers. 
D)  Standard firms will have an incentive to shift their production to an environmentally friendly process. 
A)  The environmentally friendly firm will be operating at a lower marginal and average cost than those firms that shift some costs to society in the form of external costs. 
B)  In a long-run competitive equilibrium in which consumers do not distinguish between environmentally friendly and standard producers, the environmentally producers will receive negative economic profits and be forced to change or exit. 
C)  Without regulations requiring firms to internalize their external costs, environmentally friendly producers will earn positive economic profits even without consumers paying them a higher price than standard producers. 
D)  Standard firms will have an incentive to shift their production to an environmentally friendly process.

Question 3

Which of the following statements is true ?

Accepted Answer

A)  Emissions-trading is trading that allows firms to buy and sell the right to pollute. 
B)  The Coase Theorem is the proposition that private markets can rarely ever achieve social efficiency. 
C)  The free-rider problem refers to those who ride on public transit systems without paying. 
D)  Government failure has never occurred in the United States. 
A)  Emissions-trading is trading that allows firms to buy and sell the right to pollute. 
B)  The Coase Theorem is the proposition that private markets can rarely ever achieve social efficiency. 
C)  The free-rider problem refers to those who ride on public transit systems without paying. 
D)  Government failure has never occurred in the United States.

Question 4

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

Accepted Answer

A)  The citizens of Wyoming will experience higher sulfur emissions as a result of the emissions trading program. 
B)  The citizens of Wyoming will experience lower sulfur emissions as a result of the emissions trading program. 
C)  The citizens of Tennessee will pay more to reduce sulfur emissions than if the government used a command-and-control approach. 
D)  The citizens of North Carolina will suffer higher emissions as a result of the emissions trading program. 
A)  The citizens of Wyoming will experience higher sulfur emissions as a result of the emissions trading program. 
B)  The citizens of Wyoming will experience lower sulfur emissions as a result of the emissions trading program. 
C)  The citizens of Tennessee will pay more to reduce sulfur emissions than if the government used a command-and-control approach. 
D)  The citizens of North Carolina will suffer higher emissions as a result of the emissions trading program.

Question 5

The optimal level of pollution is:

Accepted Answer

A)  the level at which the marginal social cost of air quality equals the marginal social benefit. 
B)  the level at which the average social cost of air quality equals the average social benefit. 
C)  the level at which the total social cost of air quality equals the total social benefit. 
D)  zero. 
A)  the level at which the marginal social cost of air quality equals the marginal social benefit. 
B)  the level at which the average social cost of air quality equals the average social benefit. 
C)  the level at which the total social cost of air quality equals the total social benefit. 
D)  zero.

Question 6

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Accepted Answer

A)  Some firms can reduce emissions at a lower cost than other firms. 
B)  A market has a small number of buyers and sellers. 
C)  Imperfect information exists on the value of a permit. 
D)  There are concerns about the value of permits in the future. 
A)  Some firms can reduce emissions at a lower cost than other firms. 
B)  A market has a small number of buyers and sellers. 
C)  Imperfect information exists on the value of a permit. 
D)  There are concerns about the value of permits in the future.

Question 7

Which of the following is an example of a positive externality? ​

Accepted Answer

A)  ​ A firm emits pollution into the air, harming members of society. 
B)  ​An auto body shop makes a lot of noise, reducing the property values of nearby homes. 
C)  ​A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood. 
D)  ​You go to a store and pay $0.65 for a candy bar that you then eat. 
A)  ​ A firm emits pollution into the air, harming members of society. 
B)  ​An auto body shop makes a lot of noise, reducing the property values of nearby homes. 
C)  ​A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood. 
D)  ​You go to a store and pay $0.65 for a candy bar that you then eat.

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following best describes this situation?

Which of the following statements is true ?

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

The optimal level of pollution is:

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Which of the following is an example of a positive externality?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Exam 14: Environmental Economics

If a good is produced up to the point where marginal social benefit equals marginal social cost, then:

If some firms internalize their external costs by being a cleaner and more "environmentally friendly" producers than other firms that do not, then which of the following best describes this situation?

Which of the following statements is true ?

Tennessee emits sulfur dioxide that flows into North Carolina. In meeting sulfur emissions regulations, the Tennessee Valley Authority (TVA), which produces electricity, buys sulfur emission permits from Wyoming. The resulting hot spot problem is:

The optimal level of pollution is:

Which of the following is not a reason why marketable permits may fail to achieve efficiency?

Which of the following is an example of a positive externality? ​

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Which of the following is an example of a positive externality?