Question 1

A resource that is a common property is

Accepted Answer

A)  oil on land owned by a drilling and refining company. 
B)  natural gas on land owned by an energy producer. 
C)  timber on land owned by a lumber company. 
D)  water in a publicly owned river. 
A)  oil on land owned by a drilling and refining company. 
B)  natural gas on land owned by an energy producer. 
C)  timber on land owned by a lumber company. 
D)  water in a publicly owned river.

Question 2

When no one owns a particular resource,

Accepted Answer

A)  property rights are clearly defined. 
B)  individuals have legal recourse for any damages caused to their resource. 
C)  no one has any incentive to consider externality spillovers associated with that resource. 
D)  positive externalities will arise. 
A)  property rights are clearly defined. 
B)  individuals have legal recourse for any damages caused to their resource. 
C)  no one has any incentive to consider externality spillovers associated with that resource. 
D)  positive externalities will arise.

Question 3

The social costs of an activity are greater than the private costs of the activity when

Accepted Answer

A)  a person does not pay all costs associated with a particular resource-using activity. 
B)  the internal costs of the resource-using activity are less than the external costs of the activity. 
C)  the internal costs of the resource-using activity are positive. 
D)  the external costs of the resource-using activity are zero. 
A)  a person does not pay all costs associated with a particular resource-using activity. 
B)  the internal costs of the resource-using activity are less than the external costs of the activity. 
C)  the internal costs of the resource-using activity are positive. 
D)  the external costs of the resource-using activity are zero.

Question 4

The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to

Accepted Answer

A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity. 
A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity.

Question 5

A good that has social costs that are less than private costs has a quantity that is

Accepted Answer

A)  too high. 
B)  too low. 
C)  just right. 
D)  equal to zero. 
A)  too high. 
B)  too low. 
C)  just right. 
D)  equal to zero.

Question 6

An externality

Accepted Answer

A)  may be positive or negative. 
B)  means a rapidly rising cost borne by consumers. 
C)  is the cost of producing a good outside the United States. 
D)  is the indirect cost, the overhead, of producing a product. 
A)  may be positive or negative. 
B)  means a rapidly rising cost borne by consumers. 
C)  is the cost of producing a good outside the United States. 
D)  is the indirect cost, the overhead, of producing a product.

Question 7

Common property is

Accepted Answer

A)  an externality. 
B)  a social cost. 
C)  property that is owned by everyone and therefore by no one. 
D)  exclusive rights of ownership. 
A)  an externality. 
B)  a social cost. 
C)  property that is owned by everyone and therefore by no one. 
D)  exclusive rights of ownership.

Question 8

As we approach total pollution abatement

Accepted Answer

A)  the marginal benefit to society declines. 
B)  the marginal benefit to society increases. 
C)  the marginal benefit to society increases, but at a decreasing rate. 
D)  the marginal cost to society declines. 
A)  the marginal benefit to society declines. 
B)  the marginal benefit to society increases. 
C)  the marginal benefit to society increases, but at a decreasing rate. 
D)  the marginal cost to society declines.

Question 9

A good that has social costs that exceed private costs has a quantity that is

Accepted Answer

A)  too high. 
B)  too low. 
C)  just right. 
D)  the best society can do. 
A)  too high. 
B)  too low. 
C)  just right. 
D)  the best society can do.

Question 10

The costs associated with reaching and enforcing agreements are called

Accepted Answer

A)  private property costs. 
B)  common property costs. 
C)  transaction costs. 
D)  public costs. 
A)  private property costs. 
B)  common property costs. 
C)  transaction costs. 
D)  public costs.

Question 11

A farmer notices that a neighboring rancher's cattle are wandering and destroying some of his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd. By doing so, the farmer

Accepted Answer

A)  can be sure that the size of the herd will be reduced and the size of his own harvest will be increased. 
B)  indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and thereby internalizes the externality. 
C)  inadvertently bears the costs of the externality when the rancher should be liable for the costs. 
D)  informs the rancher that the cattle have destroyed crops, which should induce the farmer to build a fence in order to maintain good relations. 
A)  can be sure that the size of the herd will be reduced and the size of his own harvest will be increased. 
B)  indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and thereby internalizes the externality. 
C)  inadvertently bears the costs of the externality when the rancher should be liable for the costs. 
D)  informs the rancher that the cattle have destroyed crops, which should induce the farmer to build a fence in order to maintain good relations.

Question 12

Using a graph, show the effects of a negative externality. Where is the socially optimum point of output? How can it be achieved?

Accepted Answer

@#IMG-DLM& See the above figure. E is the equilibr

Question 13

Externalities exist because

Accepted Answer

A)  private costs differ from social costs. 
B)  private costs are equal to social costs. 
C)  government has created them. 
D)  they are a function of socialism. 
A)  private costs differ from social costs. 
B)  private costs are equal to social costs. 
C)  government has created them. 
D)  they are a function of socialism.

Question 14

Wild animals are likely to be

Accepted Answer

A)  private property. 
B)  endangered species. 
C)  domesticated by humans. 
D)  all of the above. 
A)  private property. 
B)  endangered species. 
C)  domesticated by humans. 
D)  all of the above.

Question 15

The costs associated with the negotiation and enforcement of an agreement are

Accepted Answer

A)  property costs. 
B)  resource factor costs. 
C)  transaction costs. 
D)  attorney fees. 
A)  property costs. 
B)  resource factor costs. 
C)  transaction costs. 
D)  attorney fees.

Question 16

Why don't people take into consideration the external costs of their actions and reduce the amount of externalities?

Accepted Answer

People have no incentive to take into co

Question 17

The Black Ash Steel Company's plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ash's pollution. These additional medical costs represent

Accepted Answer

A)  a positive externality. 
B)  a negative externality. 
C)  the company's private costs. 
D)  the neighboring families' external costs. 
A)  a positive externality. 
B)  a negative externality. 
C)  the company's private costs. 
D)  the neighboring families' external costs.

Question 18

Endangered species are likely to be

Accepted Answer

A)  private property. 
B)  common property. 
C)  both private and common property. 
D)  neither private nor common property. 
A)  private property. 
B)  common property. 
C)  both private and common property. 
D)  neither private nor common property.

Question 19

When social costs of an activity exceed private costs

Accepted Answer

A)  there is a tendency for resources to be under-utilized. 
B)  this means that resources are being efficiently used. 
C)  there is a tendency for resources to be over-utilized. 
D)  None of the above is correct. 
A)  there is a tendency for resources to be under-utilized. 
B)  this means that resources are being efficiently used. 
C)  there is a tendency for resources to be over-utilized. 
D)  None of the above is correct.

Question 20

All of the following are examples of goods for which external costs commonly exist EXCEPT

Accepted Answer

A)  cigarettes. 
B)  automobiles. 
C)  vaccinations. 
D)  oil transportation. 
A)  cigarettes. 
B)  automobiles. 
C)  vaccinations. 
D)  oil transportation.

Exam 31: Environmental Economics

A resource that is a common property is

When no one owns a particular resource,

The social costs of an activity are greater than the private costs of the activity when

The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to

A good that has social costs that are less than private costs has a quantity that is

An externality

Common property is

As we approach total pollution abatement

A good that has social costs that exceed private costs has a quantity that is

The costs associated with reaching and enforcing agreements are called

A farmer notices that a neighboring rancher's cattle are wandering and destroying some of his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd. By doing so, the farmer

Using a graph, show the effects of a negative externality. Where is the socially optimum point of output? How can it be achieved?

Externalities exist because

Wild animals are likely to be

The costs associated with the negotiation and enforcement of an agreement are

Why don't people take into consideration the external costs of their actions and reduce the amount of externalities?

The Black Ash Steel Company's plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ash's pollution. These additional medical costs represent

Endangered species are likely to be

When social costs of an activity exceed private costs

All of the following are examples of goods for which external costs commonly exist EXCEPT

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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