Question 1

Once a firm is forced to consider an external cost,the price of its product will ________ and output will ________.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase

Question 2

Firms that can only lower pollution at a high cost will have a high willingness to pay for pollution permits.

Accepted Answer

A) True 
 B)False

Question 3

Another name for marketable pollution permits is a cap-and-trade system.

Accepted Answer

A) True 
 B)False

Question 4

Markets which have external costs will produce ________ output than the socially efficient level whereas markets which have external benefits will produce ________ output than the socially efficient level.

Accepted Answer

A)  less; less 
B)  more; more 
C)  more; less 
D)  less; more 
A)  less; less 
B)  more; more 
C)  more; less 
D)  less; more

Question 5

Suppose there are only two tire manufacturers in an area,and they generate the same amount of carbon emission pollution per hour.The only difference is that firm 1 is a low-cost firm and firm 2 is a high-cost firm.What would we expect if the government were to use a uniform abatement policy?

Accepted Answer

A)  The demand for tires will increase. 
B)  The quantity of tires produced will increase. 
C)  The uniform abatement policy is likely to be inefficient. 
D)  The uniform abatement policy is likely to be efficient. 
A)  The demand for tires will increase. 
B)  The quantity of tires produced will increase. 
C)  The uniform abatement policy is likely to be inefficient. 
D)  The uniform abatement policy is likely to be efficient.

Question 6

The government imposes taxes on firms which generate external costs in an effort to

Accepted Answer

A)  make it easier for economists to measure external costs. 
B)  lead to a zero level of output. 
C)  force decision makers to consider the full costs of their actions. 
D)  lower the firms' costs of production. 
A)  make it easier for economists to measure external costs. 
B)  lead to a zero level of output. 
C)  force decision makers to consider the full costs of their actions. 
D)  lower the firms' costs of production.

Question 7

When the government imposes a tax on a firm that generates external costs,the tax is

Accepted Answer

A)  always borne entirely by the firm. 
B)  always borne entirely by the consumer. 
C)  usually borne by both the firm and the consumer. 
D)  borne only by the government. 
A)  always borne entirely by the firm. 
B)  always borne entirely by the consumer. 
C)  usually borne by both the firm and the consumer. 
D)  borne only by the government.

Question 8

How is a system of marketable pollution permits set up?

Accepted Answer

Generally,the government will

Question 9

The primary source of smog-causing pollutants is paper mills.

Accepted Answer

A) True 
 B)False

Question 10

Recall the Application about reducing pollution generated from international shipping to answer the following question(s).
-According to the Application,3% of global CO₂ emissions come from international shipping.What tool did the policy analysts use for comparing the cost of alternative reduction methods?

Accepted Answer

A)  They computed the average marginal cost of each method. 
B)  They computed the marginal abatement cost of each method. 
C)  They computed the total marginal cost of each method. 
D)  The analysts were unable to compare the costs of alternative reduction methods. 
A)  They computed the average marginal cost of each method. 
B)  They computed the marginal abatement cost of each method. 
C)  They computed the total marginal cost of each method. 
D)  The analysts were unable to compare the costs of alternative reduction methods.

Question 11

Pollution abatement results in benefits that exceed the costs to society.

Accepted Answer

A) True 
 B)False

Question 12

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

Accepted Answer

A) True 
 B)False

Question 13

The study of external costs is a major concern of

Accepted Answer

A)  labor economics. 
B)  international economics. 
C)  environmental economics. 
D)  macroeconomists. 
A)  labor economics. 
B)  international economics. 
C)  environmental economics. 
D)  macroeconomists.

Question 14

Table 16.1
-Producers X and Y dump waste into a local river.Table 16.1 shows the production costs each firm faces at different levels of waste.The government in the area has created a set of pollution permits.Each permit allows a producer to dump 100 gallons of waste.If the government issues an equal number of pollution permits to each producer,

Accepted Answer

A)  neither producer will want to sell its permits at a price of $300. 
B)  Producer X will be more willing to sell its permits than will Producer Y. 
C)  both producers would be willing to sell all permits at a price of $50. 
D)  Producer Y will be more willing to sell its permits than will Producer X. 
A)  neither producer will want to sell its permits at a price of $300. 
B)  Producer X will be more willing to sell its permits than will Producer Y. 
C)  both producers would be willing to sell all permits at a price of $50. 
D)  Producer Y will be more willing to sell its permits than will Producer X.

Question 15

Which of the following is a way that the government runs a system of marketable pollution permits?

Accepted Answer

A)  picks a target pollution level 
B)  oversupplies the market with permits 
C)  prohibits the trading of permits 
D)  all of the above 
A)  picks a target pollution level 
B)  oversupplies the market with permits 
C)  prohibits the trading of permits 
D)  all of the above

Question 16

Suppose that a paper producer dumps its waste into a local river.Explain why this situation is inefficient.

Accepted Answer

Firms maximize profit by taking into acc

Question 17

In markets where external costs exist,efficiency cannot be enhanced by the creation of marketable pollution permits.

Accepted Answer

A) True 
 B)False

Question 18

Explain how a pollution tax on automobiles would work toward effectively internalizing an external cost.

Accepted Answer

If the tax is imposed,then people will b

Question 19

A power plant is emitting nitrogen oxides,a contributing factor in acid rain and in urban smog.If the power plant is taxed on the emission of nitrogen oxides,we can expect the amount of energy produced by the power plant to decrease.

Accepted Answer

A) True 
 B)False

Question 20

Jason and Lauren live in the countryside 30 minutes from a large city in Virginia.They moved there because they wanted to enjoy the fresh air.After a year of living in their house,the 200 acres that surround their house were zoned for an industrial property.A paper mill was built in the area and now emits strong gases that can be smelled from miles away.The paper mill's emission of gases is an example of a(n)

Accepted Answer

A)  public good. 
B)  good that imposes an external cost. 
C)  good that provides an external benefit. 
D)  efficient good. 
A)  public good. 
B)  good that imposes an external cost. 
C)  good that provides an external benefit. 
D)  efficient good.

Once a firm is forced to consider an external cost,the price of its product will and output will .

Firms that can only lower pollution at a high cost will have a high willingness to pay for pollution permits.

Another name for marketable pollution permits is a cap-and-trade system.

Markets which have external costs will produce output than the socially efficient level whereas markets which have external benefits will produce output than the socially efficient level.

Suppose there are only two tire manufacturers in an area,and they generate the same amount of carbon emission pollution per hour.The only difference is that firm 1 is a low-cost firm and firm 2 is a high-cost firm.What would we expect if the government were to use a uniform abatement policy?

The government imposes taxes on firms which generate external costs in an effort to

When the government imposes a tax on a firm that generates external costs,the tax is

How is a system of marketable pollution permits set up?

The primary source of smog-causing pollutants is paper mills.

Pollution abatement results in benefits that exceed the costs to society.

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

The study of external costs is a major concern of

Which of the following is a way that the government runs a system of marketable pollution permits?

Suppose that a paper producer dumps its waste into a local river.Explain why this situation is inefficient.

In markets where external costs exist,efficiency cannot be enhanced by the creation of marketable pollution permits.

Explain how a pollution tax on automobiles would work toward effectively internalizing an external cost.

A power plant is emitting nitrogen oxides,a contributing factor in acid rain and in urban smog.If the power plant is taxed on the emission of nitrogen oxides,we can expect the amount of energy produced by the power plant to decrease.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 16: External Costs and Environmental Policy

Once a firm is forced to consider an external cost,the price of its product will ________ and output will ________.

Firms that can only lower pollution at a high cost will have a high willingness to pay for pollution permits.

Another name for marketable pollution permits is a cap-and-trade system.

Markets which have external costs will produce ________ output than the socially efficient level whereas markets which have external benefits will produce ________ output than the socially efficient level.

Suppose there are only two tire manufacturers in an area,and they generate the same amount of carbon emission pollution per hour.The only difference is that firm 1 is a low-cost firm and firm 2 is a high-cost firm.What would we expect if the government were to use a uniform abatement policy?

The government imposes taxes on firms which generate external costs in an effort to

When the government imposes a tax on a firm that generates external costs,the tax is

How is a system of marketable pollution permits set up?

The primary source of smog-causing pollutants is paper mills.

Pollution abatement results in benefits that exceed the costs to society.

Firms that can reduce pollution at a low cost will be willing to sell their pollution permits.

The study of external costs is a major concern of

Which of the following is a way that the government runs a system of marketable pollution permits?

Suppose that a paper producer dumps its waste into a local river.Explain why this situation is inefficient.

In markets where external costs exist,efficiency cannot be enhanced by the creation of marketable pollution permits.

Explain how a pollution tax on automobiles would work toward effectively internalizing an external cost.

A power plant is emitting nitrogen oxides,a contributing factor in acid rain and in urban smog.If the power plant is taxed on the emission of nitrogen oxides,we can expect the amount of energy produced by the power plant to decrease.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Once a firm is forced to consider an external cost,the price of its product will and output will .

Markets which have external costs will produce output than the socially efficient level whereas markets which have external benefits will produce output than the socially efficient level.