Question 1

When a person does not have to pay the full costs for using a scarce resource, then there is

Accepted Answer

A)  an underproduction of a good. 
B)  a negative externality. 
C)  a positive externality. 
D)  too little economic profit in the activity. 
A)  an underproduction of a good. 
B)  a negative externality. 
C)  a positive externality. 
D)  too little economic profit in the activity.

Question 2

Which of the following statements about pollution or pollution control is TRUE?

Accepted Answer

A)  A nationwide uniform tax on emissions is the appropriate way to reduce pollution levels. 
B)  A tax to reduce pollution levels should be based on the economic damages rather than on the absolute amount of pollution. 
C)  Private costs of pollution usually exceed social costs. 
D)  The optimum amount of pollution abatement is where the total benefits of pollution abatement equal the total costs of pollution abatement. 
A)  A nationwide uniform tax on emissions is the appropriate way to reduce pollution levels. 
B)  A tax to reduce pollution levels should be based on the economic damages rather than on the absolute amount of pollution. 
C)  Private costs of pollution usually exceed social costs. 
D)  The optimum amount of pollution abatement is where the total benefits of pollution abatement equal the total costs of pollution abatement.

Question 3

Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By doing so,

Accepted Answer

A)  you have failed to bring about an efficient solution since you should have complained to the police. 
B)  you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer. 
C)  you have indicated the cost of the externality, which internalizes the externality. 
D)  you have indicated a willingness to make the external cost a social cost. 
A)  you have failed to bring about an efficient solution since you should have complained to the police. 
B)  you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer. 
C)  you have indicated the cost of the externality, which internalizes the externality. 
D)  you have indicated a willingness to make the external cost a social cost.

Question 4

Exclusive rights of ownership that allow the use, transfer, and exchange of property are called

Accepted Answer

A)  common property rights. 
B)  nonexclusive property rights. 
C)  private property rights. 
D)  public property rights. 
A)  common property rights. 
B)  nonexclusive property rights. 
C)  private property rights. 
D)  public property rights.

Question 5

Which of the following is NOT a possible solution to the problem of pollution?

Accepted Answer

A)  Subsidizing the costs of production of activities that generate pollution 
B)  Converting a resource that is communally owned into a privately owned resource 
C)  Regulating the quantity of pollution that can be generated 
D)  Imposing a pollution tax on producers 
A)  Subsidizing the costs of production of activities that generate pollution 
B)  Converting a resource that is communally owned into a privately owned resource 
C)  Regulating the quantity of pollution that can be generated 
D)  Imposing a pollution tax on producers

Question 6

Which of the following are most likely to become an endangered species?

Accepted Answer

A)  animals in the wild 
B)  domesticated animals 
C)  animals that people like to keep at home as pets 
D)  animals that people have property rights to own 
A)  animals in the wild 
B)  domesticated animals 
C)  animals that people like to keep at home as pets 
D)  animals that people have property rights to own

Question 7

All the costs associated with making, reaching, and enforcing agreements are called

Accepted Answer

A)  private costs. 
B)  internal costs. 
C)  transaction costs. 
D)  social costs. 
A)  private costs. 
B)  internal costs. 
C)  transaction costs. 
D)  social costs.

Question 8

To find social costs,

Accepted Answer

A)  internal and private costs have to be added together. 
B)  internal and external costs have to be added together. 
C)  internal and implicit costs have to be added together. 
D)  internal and production costs have to be added together. 
A)  internal and private costs have to be added together. 
B)  internal and external costs have to be added together. 
C)  internal and implicit costs have to be added together. 
D)  internal and production costs have to be added together.

Question 9

If all firms had to bear all the social costs of their actions, we should observe marginal cost curves

Accepted Answer

A)  of all firms shifting up. 
B)  of some firms shifting up, of some others shifting down, and of the rest not shifting at all. 
C)  of all firms that had generated externalities shifting up while there would be no change for the rest of the firms. 
D)  of some firms shifting up and of the rest shifting down. 
A)  of all firms shifting up. 
B)  of some firms shifting up, of some others shifting down, and of the rest not shifting at all. 
C)  of all firms that had generated externalities shifting up while there would be no change for the rest of the firms. 
D)  of some firms shifting up and of the rest shifting down.

Question 10

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is true?

Accepted Answer

A)  Voluntary agreements usually do not work since the owner has no incentive to negotiate. 
B)  Transactions costs must be low relative to the expected benefits of reaching an agreement. 
C)  Voluntary agreements are difficult to negotiate because they usually involve government intervention. 
D)  Voluntary agreements always leave the owner worse off. 
A)  Voluntary agreements usually do not work since the owner has no incentive to negotiate. 
B)  Transactions costs must be low relative to the expected benefits of reaching an agreement. 
C)  Voluntary agreements are difficult to negotiate because they usually involve government intervention. 
D)  Voluntary agreements always leave the owner worse off.

Question 11

Transaction costs are

Accepted Answer

A)  the costs, such as sales taxes, that are imposed by the government. 
B)  equal to the hourly cost of a lawyer used to write a contract. 
C)  the costs associated with making, reaching, and enforcing agreements. 
D)  not true costs because they relate to time rather than real resources. 
A)  the costs, such as sales taxes, that are imposed by the government. 
B)  equal to the hourly cost of a lawyer used to write a contract. 
C)  the costs associated with making, reaching, and enforcing agreements. 
D)  not true costs because they relate to time rather than real resources.

Question 12

The level of pollution at which the marginal benefits equal the marginal cost of cleaning up is always

Accepted Answer

A)  the zero pollution level. 
B)  the optimal quantity of pollution. 
C)  the pollution maximum. 
D)  the pollution minimum. 
A)  the zero pollution level. 
B)  the optimal quantity of pollution. 
C)  the pollution maximum. 
D)  the pollution minimum.

Question 13

If the market price of a good does NOT include all of the costs and benefits that arise from the production or consumption of the good, then

Accepted Answer

A)  the market is perfectly competitive. 
B)  an externality is present. 
C)  society is consuming and producing the optimal amount of the good. 
D)  resources are properly allocated. 
A)  the market is perfectly competitive. 
B)  an externality is present. 
C)  society is consuming and producing the optimal amount of the good. 
D)  resources are properly allocated.

Question 14

Joe has broken the mirror of my car. I have legal recourse to sue for damages because of

Accepted Answer

A)  social costs. 
B)  transactions costs. 
C)  common property rights. 
D)  private property rights. 
A)  social costs. 
B)  transactions costs. 
C)  common property rights. 
D)  private property rights.

Question 15

Social costs of a good are equal to

Accepted Answer

A)  external costs minus private costs. 
B)  private costs minus external costs. 
C)  private costs plus external costs. 
D)  external costs divided by the private costs. 
A)  external costs minus private costs. 
B)  private costs minus external costs. 
C)  private costs plus external costs. 
D)  external costs divided by the private costs.

Question 16

The Endangered Species Act has

Accepted Answer

A)  caused a loss of economic activities on some private land. 
B)  saved all endangered species without affecting anyone. 
C)  further reduced the number of endangered species. 
D)  had no impact on either the number of endangered species or other economic activities. 
A)  caused a loss of economic activities on some private land. 
B)  saved all endangered species without affecting anyone. 
C)  further reduced the number of endangered species. 
D)  had no impact on either the number of endangered species or other economic activities.

Question 17

-The above table shows marginal costs and marginal benefits of clean air in a particular industrial area. In the table, when the quantity of clean air is at 75 percent,

Accepted Answer

A)  the quantity of polluted air is 75 percent. 
B)  the marginal benefit of clean air exceeds the marginal cost. 
C)  the marginal benefit of clean air is less than the marginal cost. 
D)  the quantity of clean air is optimal. 
A)  the quantity of polluted air is 75 percent. 
B)  the marginal benefit of clean air exceeds the marginal cost. 
C)  the marginal benefit of clean air is less than the marginal cost. 
D)  the quantity of clean air is optimal.

Question 18

-Refer to the above figure.   is the supply curve that includes only private costs.   is the supply curve that includes social costs. The free market rate of output is ________ and the corrected, socially optimal amount of output is ________.

Accepted Answer

A)    ;   
B)    ;   
C)    ;   
D)    ;   
A)    ;   
B)    ;   
C)    ;   
D)    ;

Question 19

Suppose people value clean air more as their incomes increase. What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?

Accepted Answer

The optimal amount of clean air would in

Question 20

In order to internalize the externality due to pollution, the government should impose a tax based on

Accepted Answer

A)  the economic damage associated with the pollution. 
B)  the physical amount of pollution. 
C)  the size of the firm causing the pollution. 
D)  the value of the pollution-causing business activity. 
A)  the economic damage associated with the pollution. 
B)  the physical amount of pollution. 
C)  the size of the firm causing the pollution. 
D)  the value of the pollution-causing business activity.

Exam 31: Environmental Economics

When a person does not have to pay the full costs for using a scarce resource, then there is

Which of the following statements about pollution or pollution control is TRUE?

Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By doing so,

Exclusive rights of ownership that allow the use, transfer, and exchange of property are called

Which of the following is NOT a possible solution to the problem of pollution?

Which of the following are most likely to become an endangered species?

All the costs associated with making, reaching, and enforcing agreements are called

To find social costs,

If all firms had to bear all the social costs of their actions, we should observe marginal cost curves

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is true?

Transaction costs are

The level of pollution at which the marginal benefits equal the marginal cost of cleaning up is always

If the market price of a good does NOT include all of the costs and benefits that arise from the production or consumption of the good, then

Joe has broken the mirror of my car. I have legal recourse to sue for damages because of

Social costs of a good are equal to

The Endangered Species Act has

-The above table shows marginal costs and marginal benefits of clean air in a particular industrial area. In the table, when the quantity of clean air is at 75 percent,

-Refer to the above figure. is the supply curve that includes only private costs. is the supply curve that includes social costs. The free market rate of output is ________ and the corrected, socially optimal amount of output is ________.

Suppose people value clean air more as their incomes increase. What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?

In order to internalize the externality due to pollution, the government should impose a tax based on

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-Refer to the above figure. is the supply curve that includes only private costs. is the supply curve that includes social costs. The free market rate of output is and the corrected, socially optimal amount of output is .