Question 1

The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant

Accepted Answer

A)  levy the same tax per unit of pollution on both plants. 
B)  levy a higher tax per unit of pollution on Plant A because of its higher economic damage. 
B) ) Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government should 
C)  levy a higher tax per unit of pollution on Plant B because of its lower economic damage. 
D)  tax only Plant A but not Plant B because Plant B generates less revenue. 
A)  levy the same tax per unit of pollution on both plants. 
B)  levy a higher tax per unit of pollution on Plant A because of its higher economic damage. 
B) ) Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government should 
C)  levy a higher tax per unit of pollution on Plant B because of its lower economic damage. 
D)  tax only Plant A but not Plant B because Plant B generates less revenue.

Question 2

In general, we would expect the marginal cost of pollution abatement to be

Accepted Answer

A)  zero. 
B)  decreasing. 
C)  increasing. 
D)  constant. 
A)  zero. 
B)  decreasing. 
C)  increasing. 
D)  constant.

Question 3

To efficiently improve environmental quality, it is usually

Accepted Answer

A)  better to focus on the hardest areas to clean up first since these usually are the biggest problems. 
B)  more appropriate to concentrate on the physical quantities of pollution rather than on economic costs. 
C)  best to set up stringent emission standards that must be followed by everyone. 
D)  better to focus on economic damages rather than physical quantities of pollution. 
A)  better to focus on the hardest areas to clean up first since these usually are the biggest problems. 
B)  more appropriate to concentrate on the physical quantities of pollution rather than on economic costs. 
C)  best to set up stringent emission standards that must be followed by everyone. 
D)  better to focus on economic damages rather than physical quantities of pollution.

Question 4

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. As long as Black Ash is allowed to emit pollution and ignore any externalities, the firm will

Accepted Answer

A)  overproduce. 
B)  under produce. 
C)  charge too high a price for its output. 
D)  be absorbing the full value of its social costs. 
A)  overproduce. 
B)  under produce. 
C)  charge too high a price for its output. 
D)  be absorbing the full value of its social costs.

Question 5

When the social costs exceed the private costs, economists state that there is

Accepted Answer

A)  a positive externality. 
B)  an underproduction of output. 
C)  a negative externality. 
D)  social appreciation of resources. 
A)  a positive externality. 
B)  an underproduction of output. 
C)  a negative externality. 
D)  social appreciation of resources.

Question 6

If firms were forced to take into account the full social costs of production, then

Accepted Answer

A)  output would decrease but pollution levels would probably remain at the same levels. 
B)  output would be unaffected but pollution levels would come down. 
C)  output and pollution levels would decrease. 
D)  output could be increased and pollution levels would decrease. 
A)  output would decrease but pollution levels would probably remain at the same levels. 
B)  output would be unaffected but pollution levels would come down. 
C)  output and pollution levels would decrease. 
D)  output could be increased and pollution levels would decrease.

Question 7

An example of a situation in which the social costs are greater than the private costs would be

Accepted Answer

A)  a new restaurant takes business away from an established restaurant. 
B)  hand-held calculators putting slide rule manufacturers out of business. 
C)  when a member of a rock band's ability to hear deteriorates from performing in so many loud concerts. 
D)  a physician who cannot examine patients with a stethoscope in an examination room adjacent to an airport. 
A)  a new restaurant takes business away from an established restaurant. 
B)  hand-held calculators putting slide rule manufacturers out of business. 
C)  when a member of a rock band's ability to hear deteriorates from performing in so many loud concerts. 
D)  a physician who cannot examine patients with a stethoscope in an examination room adjacent to an airport.

Question 8

Which of the following is NOT an example of common property?

Accepted Answer

A)  a trampoline 
B)  air 
C)  gravity 
D)  sunshine 
A)  a trampoline 
B)  air 
C)  gravity 
D)  sunshine

Question 9

-Refer to the above figure. The marginal benefit of pollution abatement is curve

Accepted Answer

A)  (1). 
B)  (2). 
C)  (3). 
D)  (4). 
A)  (1). 
B)  (2). 
C)  (3). 
D)  (4).

Question 10

If a good is produced by firms that incur all private and external costs, the price consumers pay

Accepted Answer

A)  will be efficient since it includes all social costs. 
B)  will be too low. 
C)  will be too high because the consumers end up paying all of the costs instead of the firm. 
D)  will be the correct price, but inefficient. 
A)  will be efficient since it includes all social costs. 
B)  will be too low. 
C)  will be too high because the consumers end up paying all of the costs instead of the firm. 
D)  will be the correct price, but inefficient.

Question 11

Which of the following is a true statement?

Accepted Answer

A)  Externalities cannot be solved by market solutions and always require government action. 
B)  Externalities would never be a problem if people were willing to comply with government regulations. 
C)  Voluntary agreements can solve externality situations by making the party incurring the costs bear the costs of his or her actions. 
D)  Externalities can only be handled by government regulation and emission taxes cannot work effectively. 
A)  Externalities cannot be solved by market solutions and always require government action. 
B)  Externalities would never be a problem if people were willing to comply with government regulations. 
C)  Voluntary agreements can solve externality situations by making the party incurring the costs bear the costs of his or her actions. 
D)  Externalities can only be handled by government regulation and emission taxes cannot work effectively.

Question 12

According to economic analysis, the optimal level of pollution is

Accepted Answer

A)  always zero. 
B)  at the point at which the marginal benefits of pollution control exceed the marginal cost. 
C)  at the point at which the marginal benefits of pollution control are less than the marginal cost. 
D)  at the point at which the marginal benefits from pollution control are equal to the marginal cost. 
A)  always zero. 
B)  at the point at which the marginal benefits of pollution control exceed the marginal cost. 
C)  at the point at which the marginal benefits of pollution control are less than the marginal cost. 
D)  at the point at which the marginal benefits from pollution control are equal to the marginal cost.

Question 13

You enter a classroom, which is littered with newspapers. This is because

Accepted Answer

A)  students are too lazy to clean up. 
B)  maintenance people only clean once a day. 
C)  it is a way to protest against the tuition rates. 
D)  students do not pay for littering. 
A)  students are too lazy to clean up. 
B)  maintenance people only clean once a day. 
C)  it is a way to protest against the tuition rates. 
D)  students do not pay for littering.

Question 14

In which of the following externality situations would it be most likely that voluntary agreements could be used to internalize an externality?

Accepted Answer

A)  Littering on highways 
B)  Overharvesting of alligators in Louisiana 
C)  Poaching of elephants in Africa 
D)  Trees of one neighbor blocking a view of another 
A)  Littering on highways 
B)  Overharvesting of alligators in Louisiana 
C)  Poaching of elephants in Africa 
D)  Trees of one neighbor blocking a view of another

Question 15

When a polluter has to bear the full social cost of their actions, they will

Accepted Answer

A)  weigh the costs and benefits of each potential action and might decide to not stop polluting by paying a fine. 
B)  go out of business since pollution abatement is expensive. 
C)  will always decide to reduce the amount of pollution by reducing the quantity they produce. 
D)  increase the price of the product and the quantity produced to pay for the additional costs. 
A)  weigh the costs and benefits of each potential action and might decide to not stop polluting by paying a fine. 
B)  go out of business since pollution abatement is expensive. 
C)  will always decide to reduce the amount of pollution by reducing the quantity they produce. 
D)  increase the price of the product and the quantity produced to pay for the additional costs.

Question 16

If a person does not pay all costs associated with a particular resource-using activity, then

Accepted Answer

A)  the external costs of the activity are greater than the private costs of the activity. 
B)  the social costs of the activity are greater than the private costs of the activity. 
C)  the external costs of the activity are greater than the internal costs of the activity. 
D)  the full costs of the activity are the sum of private costs plus internal costs. 
A)  the external costs of the activity are greater than the private costs of the activity. 
B)  the social costs of the activity are greater than the private costs of the activity. 
C)  the external costs of the activity are greater than the internal costs of the activity. 
D)  the full costs of the activity are the sum of private costs plus internal costs.

Question 17

A person removes the anti-pollution devices on his automobile. An external cost associated with this is

Accepted Answer

A)  the feeling of guilt the person feels for violating the law. 
B)  the ticket he gets when a highway patrol officer pulls him over. 
C)  the man's neighbor washes his car more often because of increasing smog. 
D)  the man buys less gasoline, reducing the income of local gas stations. 
A)  the feeling of guilt the person feels for violating the law. 
B)  the ticket he gets when a highway patrol officer pulls him over. 
C)  the man's neighbor washes his car more often because of increasing smog. 
D)  the man buys less gasoline, reducing the income of local gas stations.

Question 18

By 2006, the market price of European Union emissions allowances dropped because

Accepted Answer

A)  governments set their overall emission caps too high. 
B)  firms had drastically reduced their emissions. 
C)  firms underreport their emission amounts. 
D)  the market did not clear. 
A)  governments set their overall emission caps too high. 
B)  firms had drastically reduced their emissions. 
C)  firms underreport their emission amounts. 
D)  the market did not clear.

Question 19

The optimal amount of pollution is not zero because

Accepted Answer

A)  it has been found that pollution in moderate amounts actually has positive benefits. 
B)  there are no benefits to anyone from having zero pollution. 
C)  zero pollution would be too costly. 
D)  we don't have the political structure that could accomplish the goal. 
A)  it has been found that pollution in moderate amounts actually has positive benefits. 
B)  there are no benefits to anyone from having zero pollution. 
C)  zero pollution would be too costly. 
D)  we don't have the political structure that could accomplish the goal.

Question 20

Which of the following is TRUE about species in the world?

Accepted Answer

A)  Most extinct species became extinct within the past 30 years. 
B)  The majority of extinct species became extinct before humans appeared. 
C)  Extinct species became extinct only after human appeared. 
D)  No species has ever become extinct. 
A)  Most extinct species became extinct within the past 30 years. 
B)  The majority of extinct species became extinct before humans appeared. 
C)  Extinct species became extinct only after human appeared. 
D)  No species has ever become extinct.

Exam 31: Environmental Economics

The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant

In general, we would expect the marginal cost of pollution abatement to be

To efficiently improve environmental quality, it is usually

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. As long as Black Ash is allowed to emit pollution and ignore any externalities, the firm will

When the social costs exceed the private costs, economists state that there is

If firms were forced to take into account the full social costs of production, then

An example of a situation in which the social costs are greater than the private costs would be

Which of the following is NOT an example of common property?

-Refer to the above figure. The marginal benefit of pollution abatement is curve

If a good is produced by firms that incur all private and external costs, the price consumers pay

Which of the following is a true statement?

According to economic analysis, the optimal level of pollution is

You enter a classroom, which is littered with newspapers. This is because

In which of the following externality situations would it be most likely that voluntary agreements could be used to internalize an externality?

When a polluter has to bear the full social cost of their actions, they will

If a person does not pay all costs associated with a particular resource-using activity, then

A person removes the anti-pollution devices on his automobile. An external cost associated with this is

By 2006, the market price of European Union emissions allowances dropped because

The optimal amount of pollution is not zero because

Which of the following is TRUE about species in the world?

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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