Question 1

-The optimal quantity of pollution in the above figure

Accepted Answer

A)  is defined as the level where the marginal benefit is at a maximum. 
B)  is where the optimal degree of air cleanliness is 100 percent. 
C)  is the level of pollution at which the marginal benefit equals the marginal cost. 
D)  cannot be determined. 
A)  is defined as the level where the marginal benefit is at a maximum. 
B)  is where the optimal degree of air cleanliness is 100 percent. 
C)  is the level of pollution at which the marginal benefit equals the marginal cost. 
D)  cannot be determined.

Question 2

When social costs of an activity exceed private costs

Accepted Answer

A)  a market failure exists. 
B)  there is a tendency for resources to be under-utilized. 
C)  this means that resources are being efficiently used. 
D)  the actual price is above the efficient price. 
A)  a market failure exists. 
B)  there is a tendency for resources to be under-utilized. 
C)  this means that resources are being efficiently used. 
D)  the actual price is above the efficient price.

Question 3

A good that has external costs associated with its production will be

Accepted Answer

A)  produced at the optimal level. 
B)  underproduced. 
C)  overproduced. 
D)  not produced. 
A)  produced at the optimal level. 
B)  underproduced. 
C)  overproduced. 
D)  not produced.

Question 4

Another name for internal cost is

Accepted Answer

A)  private cost. 
B)  social cost. 
C)  psychological cost. 
D)  marginal cost. 
A)  private cost. 
B)  social cost. 
C)  psychological cost. 
D)  marginal cost.

Question 5

-In the above figure, if a firm is cleaning up   units of pollution, it is an

Accepted Answer

A)  efficient solution, because marginal social benefits are greater than marginal social costs. 
B)  efficient solution, because marginal social benefits are equal to marginal social costs. 
C)  inefficient solution, because marginal social benefits are greater than marginal social costs. 
D)  inefficient solution, because marginal social costs are greater than marginal social benefits. 
A)  efficient solution, because marginal social benefits are greater than marginal social costs. 
B)  efficient solution, because marginal social benefits are equal to marginal social costs. 
C)  inefficient solution, because marginal social benefits are greater than marginal social costs. 
D)  inefficient solution, because marginal social costs are greater than marginal social benefits.

Question 6

-In the above table, the optimal quantity of clean air is

Accepted Answer

A)  25 percent. 
B)  50 percent. 
C)  75 percent. 
D)  100 percent. 
A)  25 percent. 
B)  50 percent. 
C)  75 percent. 
D)  100 percent.

Question 7

When a person can pass some of her costs of using a resource on to someone else,

Accepted Answer

A)  the use of the resource is not affected by her actions. 
B)  the internal costs of using the resource exceed the private costs. 
C)  she uses too much of the resource. 
D)  she uses too little of the resource. 
A)  the use of the resource is not affected by her actions. 
B)  the internal costs of using the resource exceed the private costs. 
C)  she uses too much of the resource. 
D)  she uses too little of the resource.

Question 8

A situation in which a private cost diverges from a social cost is

Accepted Answer

A)  internal costs. 
B)  an externality. 
C)  an internality. 
D)  a transactions cost. 
A)  internal costs. 
B)  an externality. 
C)  an internality. 
D)  a transactions cost.

Question 9

The marginal cost curve of pollution abatement is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  horizontal. 
D)  vertical. 
A)  downward sloping. 
B)  upward sloping. 
C)  horizontal. 
D)  vertical.

Question 10

The marginal cost of pollution abatement is represented by

Accepted Answer

A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal curve. 
D)  a vertical curve. 
A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal curve. 
D)  a vertical curve.

Question 11

-In the above figure,   represents the supply curve which includes private costs, and   is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

Accepted Answer

A)    ,   
B)    ,   
C)    ,   
D)    ,   
A)    ,   
B)    ,   
C)    ,   
D)    ,

Question 12

According to economic analysis, the optimal quantity of pollution exists at the point at which the

Accepted Answer

A)  total benefit of pollution control is equal to the total cost. 
B)  marginal benefit of pollution control is equal to the marginal cost. 
C)  level of pollution is at zero. 
D)  level of pollution is acceptable to the society. 
A)  total benefit of pollution control is equal to the total cost. 
B)  marginal benefit of pollution control is equal to the marginal cost. 
C)  level of pollution is at zero. 
D)  level of pollution is acceptable to the society.

Question 13

Property owned by everyone (and thus no one in particular) is generally referred to as

Accepted Answer

A)  social property. 
B)  private property. 
C)  common property. 
D)  natural property. 
A)  social property. 
B)  private property. 
C)  common property. 
D)  natural property.

Question 14

Which of the following is TRUE of the cap-and-trade program in the United States?

Accepted Answer

A)  The state of California began a cap-and-trade program in 2013. 
B)  The United States is a participant of the Kyoto Protocol that implemented the cap-and-trade program in 2005. 
C)  All states in the U.S. have implemented a cap-and-trade program before the Kyoto Protocol in 2005. 
D)  The state of Texas is currently the only state in the U.S. that has not implemented a cap-and-trade program. 
A)  The state of California began a cap-and-trade program in 2013. 
B)  The United States is a participant of the Kyoto Protocol that implemented the cap-and-trade program in 2005. 
C)  All states in the U.S. have implemented a cap-and-trade program before the Kyoto Protocol in 2005. 
D)  The state of Texas is currently the only state in the U.S. that has not implemented a cap-and-trade program.

Question 15

Suppose there are two identical factories on a river. Both require clean water for their production processes. The upstream firm gets clean water from the river and dumps dirty water into the river. The downstream firm must clean the water it gets from the river before it can use the water and later it dumps dirty water into the river. In this situation

Accepted Answer

A)  the private costs of the two firms are the same since both dump dirty water into the river. 
B)  the upstream factory's private costs are lower than its social costs since it passes the costs of the dirty water on to the downstream firm. For the downstream firms, private costs equal social costs. 
C)  the private costs of the downstream firm are greater than the private costs of the upstream firm and the social costs are less than the private costs for both firms. 
D)  the private costs of the upstream firm are less than its social costs while the social costs of the downstream firm are less than its private costs. 
A)  the private costs of the two firms are the same since both dump dirty water into the river. 
B)  the upstream factory's private costs are lower than its social costs since it passes the costs of the dirty water on to the downstream firm. For the downstream firms, private costs equal social costs. 
C)  the private costs of the downstream firm are greater than the private costs of the upstream firm and the social costs are less than the private costs for both firms. 
D)  the private costs of the upstream firm are less than its social costs while the social costs of the downstream firm are less than its private costs.

Question 16

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

Accepted Answer

A)  continuing to overproduce the good, lowering the price of the good, or cutting output. 
B)  reducing the pollution-causing activity, changing production techniques, or paying a price to pollute. 
C)  installing pollution abatement equipment, paying to pollute, or just ignoring the issue. 
D)  paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications. 
A)  continuing to overproduce the good, lowering the price of the good, or cutting output. 
B)  reducing the pollution-causing activity, changing production techniques, or paying a price to pollute. 
C)  installing pollution abatement equipment, paying to pollute, or just ignoring the issue. 
D)  paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications.

Question 17

The marginal benefit of pollution abatement

Accepted Answer

A)  increases at an increasing rate as abatement increases. 
B)  decreases as pollution abatement increases because of the law of diminishing marginal utility. 
C)  increases as pollution abatement increases because of the law of increasing marginal returns. 
D)  is constant as pollution abatement increases. 
A)  increases at an increasing rate as abatement increases. 
B)  decreases as pollution abatement increases because of the law of diminishing marginal utility. 
C)  increases as pollution abatement increases because of the law of increasing marginal returns. 
D)  is constant as pollution abatement increases.

Question 18

Private costs are

Accepted Answer

A)  external costs borne by private firms. 
B)  explicit costs rather than implicit costs. 
C)  costs borne by private members of society rather than governmental bodies. 
D)  costs borne solely by the individuals who incur them. 
A)  external costs borne by private firms. 
B)  explicit costs rather than implicit costs. 
C)  costs borne by private members of society rather than governmental bodies. 
D)  costs borne solely by the individuals who incur them.

Question 19

-Use the above table. What will the price be when external costs are internalized with a tax?

Accepted Answer

A)  $14 
B)  $13 
C)  $12.20 
D)  $1.80 
A)  $14 
B)  $13 
C)  $12.20 
D)  $1.80

Question 20

For endangered species, the federal government

Accepted Answer

A)  can only protect the animal on federal property because of common property issues. 
B)  has the right to regulate activities on private land to save the species from extinction. 
C)  turns over the protection of an endangered species to the state authorities where the species lives. 
D)  will capture a pair of animals so that the species does not become extinct. 
A)  can only protect the animal on federal property because of common property issues. 
B)  has the right to regulate activities on private land to save the species from extinction. 
C)  turns over the protection of an endangered species to the state authorities where the species lives. 
D)  will capture a pair of animals so that the species does not become extinct.

Exam 31: Environmental Economics

-The optimal quantity of pollution in the above figure

When social costs of an activity exceed private costs

A good that has external costs associated with its production will be

Another name for internal cost is

-In the above figure, if a firm is cleaning up units of pollution, it is an

-In the above table, the optimal quantity of clean air is

When a person can pass some of her costs of using a resource on to someone else,

A situation in which a private cost diverges from a social cost is

The marginal cost curve of pollution abatement is

The marginal cost of pollution abatement is represented by

-In the above figure, represents the supply curve which includes private costs, and is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

According to economic analysis, the optimal quantity of pollution exists at the point at which the

Property owned by everyone (and thus no one in particular) is generally referred to as

Which of the following is TRUE of the cap-and-trade program in the United States?

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

The marginal benefit of pollution abatement

Private costs are

-Use the above table. What will the price be when external costs are internalized with a tax?

For endangered species, the federal government

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

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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

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