Question 1

The optimal amount of air pollution is

Accepted Answer

A)  found by equating the marginal benefits from reducing pollution by one more unit with the marginal costs of reducing pollution by an additional unit. 
B)  found by equating the total benefits from reducing pollution by one more unit with the total costs of reducing pollution by an additional unit. 
C)  found by setting the marginal benefits from reducing pollution by one more unit equal to zero. 
D)  a meaningless concept since we cannot monetize the environment. 
A)  found by equating the marginal benefits from reducing pollution by one more unit with the marginal costs of reducing pollution by an additional unit. 
B)  found by equating the total benefits from reducing pollution by one more unit with the total costs of reducing pollution by an additional unit. 
C)  found by setting the marginal benefits from reducing pollution by one more unit equal to zero. 
D)  a meaningless concept since we cannot monetize the environment.

Question 2

In general, pollution exists if

Accepted Answer

A)  people are unconcerned about the hazards associated with pollution. 
B)  there are poorly defined private property rights. 
C)  there are poorly defined common property rights. 
D)  profit-making activity is taken to an extreme. 
A)  people are unconcerned about the hazards associated with pollution. 
B)  there are poorly defined private property rights. 
C)  there are poorly defined common property rights. 
D)  profit-making activity is taken to an extreme.

Question 3

Which of the following statements is true for the U.S. economy?

Accepted Answer

A)  Supply of services always reflects all social costs. 
B)  Demand for services always reflects all social costs. 
C)  Private costs are not always equal to social costs. 
D)  Social benefits are always emphasized in advertising. 
A)  Supply of services always reflects all social costs. 
B)  Demand for services always reflects all social costs. 
C)  Private costs are not always equal to social costs. 
D)  Social benefits are always emphasized in advertising.

Question 4

A method of forcing a company to internalize the total cost of production is

Accepted Answer

A)  to impose a tax on the company to reduce production. 
B)  to provide a subsidy to encourage production. 
C)  for government not to interfere in the company's activities. 
D)  to force the company to reduce the wages it pays to its employees. 
A)  to impose a tax on the company to reduce production. 
B)  to provide a subsidy to encourage production. 
C)  for government not to interfere in the company's activities. 
D)  to force the company to reduce the wages it pays to its employees.

Question 5

-Refer to the above figure.   is the supply curve that includes only private costs.   is the supply curve that includes social costs. If the firm sets output by focusing on private costs, the per-unit external cost will equal

Accepted Answer

A)    . 
B)    -   . 
C)    -   . 
D)    -   . 
A)    . 
B)    -   . 
C)    -   . 
D)    -   .

Question 6

The marginal cost of pollution abatement is the

Accepted Answer

A)  additional cost to clean up an additional unit of pollution. 
B)  additional benefit from cleaning up an additional unit of pollution. 
C)  total social costs of pollution clean-up divided by total social benefits. 
D)  total social costs of pollution clean-up divided by the total units of clean-up. 
A)  additional cost to clean up an additional unit of pollution. 
B)  additional benefit from cleaning up an additional unit of pollution. 
C)  total social costs of pollution clean-up divided by total social benefits. 
D)  total social costs of pollution clean-up divided by the total units of clean-up.

Question 7

What are social costs? How do they differ from private costs?

Accepted Answer

Social costs are costs borne by society

Question 8

In principle, a cap-and-trade program would

Accepted Answer

A)  cause firms to generate more pollution than their allowed limits. 
B)  cause firms to generate less pollution than their allowed limits. 
C)  raise the production costs of all firms. 
D)  lower the production costs of all firms. 
A)  cause firms to generate more pollution than their allowed limits. 
B)  cause firms to generate less pollution than their allowed limits. 
C)  raise the production costs of all firms. 
D)  lower the production costs of all firms.

Question 9

The marginal benefit 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 10

Costs that are borne solely by the individuals who incur them are

Accepted Answer

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

Question 11

Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases emission through 2020 to

Accepted Answer

A)  as much as 20 percent below the levels in the 1990s. 
B)  as much as 5 percent below the levels in the 1990s. 
C)  as much as 50 percent below the levels in the 1990s. 
D)  as much as 50 percent below the levels in the 1960s. 
A)  as much as 20 percent below the levels in the 1990s. 
B)  as much as 5 percent below the levels in the 1990s. 
C)  as much as 50 percent below the levels in the 1990s. 
D)  as much as 50 percent below the levels in the 1960s.

Question 12

From an economic standpoint, the amount of pollution should be

Accepted Answer

A)  zero. 
B)  the amount that allows firms to maximize profits. 
C)  the amount where firms are earning a normal rate of return on investment. 
D)  at the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. 
A)  zero. 
B)  the amount that allows firms to maximize profits. 
C)  the amount where firms are earning a normal rate of return on investment. 
D)  at the point at which the marginal benefit from further reduction equals the marginal cost of further reduction.

Question 13

The optimal quantity of air pollution is

Accepted Answer

A)  whatever amount of pollution is produced by the profit maximizing firm. 
B)  found by equating the marginal benefits from further reductions in pollution and the marginal costs of further reductions in pollution. 
C)  found by setting the quantity of air pollution equal to the quantity of water pollution. 
D)  a meaningless concept since monetary values cannot be attached to problems associated with pollution. 
A)  whatever amount of pollution is produced by the profit maximizing firm. 
B)  found by equating the marginal benefits from further reductions in pollution and the marginal costs of further reductions in pollution. 
C)  found by setting the quantity of air pollution equal to the quantity of water pollution. 
D)  a meaningless concept since monetary values cannot be attached to problems associated with pollution.

Question 14

Suppose people value clean air more as their incomes increase, then

Accepted Answer

A)  the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality. 
B)  the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality 
C)  the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality 
D)  the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality 
A)  the marginal cost curve of pollution abatement to shift left, increasing the degree of air quality. 
B)  the marginal cost curve of pollution abatement to shift right, increasing the degree of air quality 
C)  the marginal benefit curve of pollution abatement to shift right, increasing the degree of air quality 
D)  the marginal benefit curve of pollution abatement to shift left, increasing the degree of air quality

Question 15

The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means

Accepted Answer

A)  the tax is more than the external cost associated with the product. 
B)  the tax is less than the external cost associated with the product. 
C)  the company should advertise the product more. 
D)  the company should increase the production of the product. 
A)  the tax is more than the external cost associated with the product. 
B)  the tax is less than the external cost associated with the product. 
C)  the company should advertise the product more. 
D)  the company should increase the production of the product.

Question 16

An externality refers to the idea that

Accepted Answer

A)  explicit costs differ from implicit costs. 
B)  decision-makers do not internalize all the costs. 
C)  we cannot do anything that does not affect other people. 
D)  private and internal costs differ. 
A)  explicit costs differ from implicit costs. 
B)  decision-makers do not internalize all the costs. 
C)  we cannot do anything that does not affect other people. 
D)  private and internal costs differ.

Question 17

Pollution

Accepted Answer

A)  creates a negative externality. 
B)  is increased when property rights are defined. 
C)  is the result of capitalism. 
D)  exists because air and water are privately owned resources. 
A)  creates a negative externality. 
B)  is increased when property rights are defined. 
C)  is the result of capitalism. 
D)  exists because air and water are privately owned resources.

Question 18

"Creating a free market for carbon-dioxide emission permits would only encourage firms to pollute more." Do you agree or disagree? Why?

Accepted Answer

Disagree. In a market of carbon-dioxide

Question 19

The most efficient way to get firms to reduce pollution is to

Accepted Answer

A)  set uniform emission standards and require all firms to meet the standards. 
B)  make the worst polluters shut down and go out of business. 
C)  make them pay for the social costs of production and let them decide how to respond to the higher costs. 
D)  provide firms and consumers with the information about the effects of their actions and encourage them to behave responsibly. 
A)  set uniform emission standards and require all firms to meet the standards. 
B)  make the worst polluters shut down and go out of business. 
C)  make them pay for the social costs of production and let them decide how to respond to the higher costs. 
D)  provide firms and consumers with the information about the effects of their actions and encourage them to behave responsibly.

Question 20

-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.

Exam 31: Environmental Economics

The optimal amount of air pollution is

In general, pollution exists if

Which of the following statements is true for the U.S. economy?

A method of forcing a company to internalize the total cost of production is

-Refer to the above figure. is the supply curve that includes only private costs. is the supply curve that includes social costs. If the firm sets output by focusing on private costs, the per-unit external cost will equal

The marginal cost of pollution abatement is the

What are social costs? How do they differ from private costs?

In principle, a cap-and-trade program would

The marginal benefit of pollution abatement is represented by

Costs that are borne solely by the individuals who incur them are

Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases emission through 2020 to

From an economic standpoint, the amount of pollution should be

The optimal quantity of air pollution is

Suppose people value clean air more as their incomes increase, then

The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means

An externality refers to the idea that

Pollution

"Creating a free market for carbon-dioxide emission permits would only encourage firms to pollute more." Do you agree or disagree? Why?

The most efficient way to get firms to reduce pollution is to

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

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

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