Question 1

Which of the following is the main reason for externalities?

Accepted Answer

A)  The full cost of a transaction is not borne by the buyer/seller of the product. 
B)  Police enforcement of scalping is not uniformly enforced. 
C)  the lack of organized exchanges for all goods and services 
D)  The production of public goods uses up scarce resources. 
A)  The full cost of a transaction is not borne by the buyer/seller of the product. 
B)  Police enforcement of scalping is not uniformly enforced. 
C)  the lack of organized exchanges for all goods and services 
D)  The production of public goods uses up scarce resources.

Question 2

Which of the following best describes the impact of the Emissions Trading Scheme in the European Union between 2005 and the late 2000s?

Accepted Answer

A)  Overall greenhouse gas emissions increased. 
B)  Overall greenhouse gas emissions decreased. 
C)  Overall greenhouse gas emissions were totally eliminated. 
D)  Overall greenhouse gas emissions were constant. 
A)  Overall greenhouse gas emissions increased. 
B)  Overall greenhouse gas emissions decreased. 
C)  Overall greenhouse gas emissions were totally eliminated. 
D)  Overall greenhouse gas emissions were constant.

Question 3

"The optimal level of pollution is zero." Do you agree or disagree? Why?

Accepted Answer

Disagree. There are costs to cleaning up

Question 4

Economic theory suggests that if natural resources can be held as private property, then

Accepted Answer

A)  conservation will be nonexistent. 
B)  owners will have an incentive not to abuse them. 
C)  natural resources will be sold off for immediate use. 
D)  people will simply hold them and refuse to make them available. 
A)  conservation will be nonexistent. 
B)  owners will have an incentive not to abuse them. 
C)  natural resources will be sold off for immediate use. 
D)  people will simply hold them and refuse to make them available.

Question 5

Which of the following statements is true about the optimal quantity of pollution?

Accepted Answer

A)  It equals zero. 
B)  Pollution abatement should continue up to the point where marginal cost equals the average total cost. 
C)  Trade-offs exist between producing a cleaner environment and producing other goods and services. 
D)  Firms should be allowed to determine the profit-maximizing amount of pollution abatement. 
A)  It equals zero. 
B)  Pollution abatement should continue up to the point where marginal cost equals the average total cost. 
C)  Trade-offs exist between producing a cleaner environment and producing other goods and services. 
D)  Firms should be allowed to determine the profit-maximizing amount of pollution abatement.

Question 6

To correct for the social impact of pollution, the government should levy a per-unit tax

Accepted Answer

A)  that is the same for all polluters regardless of their locations or sizes. 
B)  according to the economic damage of the pollution. 
C)  according to the business activity of the polluter. 
D)  only to those polluters that can afford to pay for the tax. 
A)  that is the same for all polluters regardless of their locations or sizes. 
B)  according to the economic damage of the pollution. 
C)  according to the business activity of the polluter. 
D)  only to those polluters that can afford to pay for the tax.

Question 7

The total benefits to society from pollution abatement

Accepted Answer

A)  increase at an increasing rate with the increase of pollution abatement. 
B)  increase at a decreasing rate with the increase of pollution abatement. 
C)  decrease at an increasing rate with the increase of pollution abatement. 
D)  decrease at a decreasing rate with the increase of pollution abatement. 
A)  increase at an increasing rate with the increase of pollution abatement. 
B)  increase at a decreasing rate with the increase of pollution abatement. 
C)  decrease at an increasing rate with the increase of pollution abatement. 
D)  decrease at a decreasing rate with the increase of pollution abatement.

Question 8

-Use the above table. If the level of production was determined by the market, it would be

Accepted Answer

A)  4. 
B)  5. 
C)  6. 
D)  7. 
A)  4. 
B)  5. 
C)  6. 
D)  7.

Question 9

Which of the following statements is true about the relationship among external, internal and social costs?

Accepted Answer

A)  Social costs will always be higher than external costs. 
B)  Social costs will always be higher than internal costs. 
C)  Internal costs will always be higher than external costs. 
D)  Internal costs will never equal external costs. 
A)  Social costs will always be higher than external costs. 
B)  Social costs will always be higher than internal costs. 
C)  Internal costs will always be higher than external costs. 
D)  Internal costs will never equal external costs.

Question 10

All of the costs associated with making and enforcing contracts are referred to as

Accepted Answer

A)  alternative costs. 
B)  opportunity costs. 
C)  marginal costs. 
D)  transactions costs. 
A)  alternative costs. 
B)  opportunity costs. 
C)  marginal costs. 
D)  transactions costs.

Question 11

The exclusive rights of ownership of property are generally referred to as

Accepted Answer

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

Question 12

In a market for emission permits, firms that emit below their allowed limits

Accepted Answer

A)  will buy even more allowances through a trading system. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  will sell their excess allowances through a trading system. 
A)  will buy even more allowances through a trading system. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  will sell their excess allowances through a trading system.

Question 13

Attaining higher and higher levels of air cleanliness causes

Accepted Answer

A)  additional costs to rise to increasingly high levels. 
B)  larger and larger increases in per capita incomes. 
C)  additional costs to fall to lower and lower levels. 
D)  larger and larger marginal benefits to society. 
A)  additional costs to rise to increasingly high levels. 
B)  larger and larger increases in per capita incomes. 
C)  additional costs to fall to lower and lower levels. 
D)  larger and larger marginal benefits to society.

Question 14

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

Accepted Answer

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

Question 15

A uniform tax according to the physical quantities of pollution may not be the appropriate way to correct for an externality because

Accepted Answer

A)  it places a unfair burden on small producers. 
B)  a uniform tax can only account for social costs and not external costs. 
C)  a firm will reduce production. 
D)  it may not adequately account for economic damages. 
A)  it places a unfair burden on small producers. 
B)  a uniform tax can only account for social costs and not external costs. 
C)  a firm will reduce production. 
D)  it may not adequately account for economic damages.

Question 16

-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 17

In order for a voluntary agreement to be reached in general, transaction costs should be

Accepted Answer

A)  infinite. 
B)  high relative to expected marginal benefits of the agreement. 
C)  low relative to expected marginal benefits of the agreement. 
D)  determined by the Environmental Protection Agency. 
A)  infinite. 
B)  high relative to expected marginal benefits of the agreement. 
C)  low relative to expected marginal benefits of the agreement. 
D)  determined by the Environmental Protection Agency.

Question 18

Is a uniform per-unit tax on firms that cause an externality an optimal policy for correcting the externality? Explain.

Accepted Answer

No. The concept of externality is about

Question 19

Today, the earth has ________ of all of the species that have ever lived.

Accepted Answer

A)  less than 1 percent 
B)  about 50 percent 
C)  about 99 percent 
D)  100 percent 
A)  less than 1 percent 
B)  about 50 percent 
C)  about 99 percent 
D)  100 percent

Question 20

The total social cost of production is equal to

Accepted Answer

A)  external cost minus internal cost. 
B)  internal cost minus external cost. 
C)  external cost plus internal cost. 
D)  internal cost plus opportunity cost. 
A)  external cost minus internal cost. 
B)  internal cost minus external cost. 
C)  external cost plus internal cost. 
D)  internal cost plus opportunity cost.

Exam 31: Environmental Economics

Which of the following is the main reason for externalities?

Which of the following best describes the impact of the Emissions Trading Scheme in the European Union between 2005 and the late 2000s?

"The optimal level of pollution is zero." Do you agree or disagree? Why?

Economic theory suggests that if natural resources can be held as private property, then

Which of the following statements is true about the optimal quantity of pollution?

To correct for the social impact of pollution, the government should levy a per-unit tax

The total benefits to society from pollution abatement

-Use the above table. If the level of production was determined by the market, it would be

Which of the following statements is true about the relationship among external, internal and social costs?

All of the costs associated with making and enforcing contracts are referred to as

The exclusive rights of ownership of property are generally referred to as

In a market for emission permits, firms that emit below their allowed limits

Attaining higher and higher levels of air cleanliness causes

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

A uniform tax according to the physical quantities of pollution may not be the appropriate way to correct for an externality because

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

In order for a voluntary agreement to be reached in general, transaction costs should be

Is a uniform per-unit tax on firms that cause an externality an optimal policy for correcting the externality? Explain.

Today, the earth has ________ of all of the species that have ever lived.

The total social cost of production is equal to

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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