Question 1

Which of the following is most likely to be private property?

Accepted Answer

A)  bees 
B)  house flies 
C)  farm raised chickens 
D)  winds 
A)  bees 
B)  house flies 
C)  farm raised chickens 
D)  winds

Question 2

Why is the optimal quantity of pollution not less than the point at which the marginal benefit equals the marginal cost?

Accepted Answer

A)  The point of intersection occurs at a low level of pollution. 
B)  There are no external costs below that level. 
C)  Below that point firms will have to reduce the quantity that they are currently producing and lower the price. 
D)  Below that point the value that people place on less pollution is less than the cost of reducing the pollution. 
A)  The point of intersection occurs at a low level of pollution. 
B)  There are no external costs below that level. 
C)  Below that point firms will have to reduce the quantity that they are currently producing and lower the price. 
D)  Below that point the value that people place on less pollution is less than the cost of reducing the pollution.

Question 3

Which of the following is most likely to be common property?

Accepted Answer

A)  a cat in a house 
B)  farm raised catfish in Alabama 
C)  tuna in the Pacific Ocean 
D)  cattle in a Texas ranch 
A)  a cat in a house 
B)  farm raised catfish in Alabama 
C)  tuna in the Pacific Ocean 
D)  cattle in a Texas ranch

Question 4

External costs are

Accepted Answer

A)  borne by individuals other than those who incurred them. 
B)  another term for implicit costs. 
C)  borne by the public but incurred by the government. 
D)  borne by the government but incurred by the public. 
A)  borne by individuals other than those who incurred them. 
B)  another term for implicit costs. 
C)  borne by the public but incurred by the government. 
D)  borne by the government but incurred by the public.

Question 5

Your neighbor has just planted some fragrant flowers. The wonderful scent drifts into your room and makes you happy.

Accepted Answer

A)  This scent is an internal cost to you. 
B)  This cannot be an externality since you are enjoying the scent. 
C)  This is an externality since you get a benefit from your neighbor's flowers. 
D)  The social cost of this activity is entirely borne by you neighbor. 
A)  This scent is an internal cost to you. 
B)  This cannot be an externality since you are enjoying the scent. 
C)  This is an externality since you get a benefit from your neighbor's flowers. 
D)  The social cost of this activity is entirely borne by you neighbor.

Question 6

Changing the ownership of the ocean from common property to private property would

Accepted Answer

A)  ensure that this resource would be allocated in a more efficient manner. 
B)  ensure that this resource would be allocated in a less efficient manner than under common property rights. 
C)  not be economically desirable. 
D)  result in no appreciable change in efficiency of utilization of this resource. 
A)  ensure that this resource would be allocated in a more efficient manner. 
B)  ensure that this resource would be allocated in a less efficient manner than under common property rights. 
C)  not be economically desirable. 
D)  result in no appreciable change in efficiency of utilization of this resource.

Question 7

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

Accepted Answer

A)  the administrative costs are high. 
B)  the cost of ascertaining the actual economic costs are relatively small. 
C)  the economic damages are zero. 
D)  the economic damages associated with the pollution are different across different locations. 
A)  the administrative costs are high. 
B)  the cost of ascertaining the actual economic costs are relatively small. 
C)  the economic damages are zero. 
D)  the economic damages associated with the pollution are different across different locations.

Question 8

The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen

Accepted Answer

A)  will not be able to fish. 
B)  can trade their rights (shares) to fish or not. 
C)  will externalize their private costs to the government. 
D)  will lower their private costs to fish. 
A)  will not be able to fish. 
B)  can trade their rights (shares) to fish or not. 
C)  will externalize their private costs to the government. 
D)  will lower their private costs to fish.

Question 9

A difficulty with using a uniform per-unit tax to address a negative externality is that

Accepted Answer

A)  the tax will reduce output. 
B)  the tax will increase price. 
C)  the social cost of pollution might vary across geographic regions. 
D)  the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms. 
A)  the tax will reduce output. 
B)  the tax will increase price. 
C)  the social cost of pollution might vary across geographic regions. 
D)  the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.

Question 10

The marginal cost curve of a firm measures

Accepted Answer

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

Question 11

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

Accepted Answer

A)  are forced to shut down. 
B)  are taxed by the government for the amount of emissions. 
C)  will sell their excess allowances through a trading system. 
D)  must buy more allowances through a trading system. 
A)  are forced to shut down. 
B)  are taxed by the government for the amount of emissions. 
C)  will sell their excess allowances through a trading system. 
D)  must buy more allowances through a trading system.

Question 12

The marginal cost to society of reducing pollution increases with the increased use of pollution abatement because

Accepted Answer

A)  of the diminishing marginal utility of abatement. 
B)  of the reduced demand for abatement. 
C)  of the diminishing returns from abatement. 
D)  of the high cost of abatement. 
A)  of the diminishing marginal utility of abatement. 
B)  of the reduced demand for abatement. 
C)  of the diminishing returns from abatement. 
D)  of the high cost of abatement.

Question 13

For voluntary action to correct an externality,

Accepted Answer

A)  transaction costs have to be high. 
B)  transaction costs have to be low. 
C)  transaction costs have to be split evenly between all of the parties involved. 
D)  transaction costs are irrelevant. 
A)  transaction costs have to be high. 
B)  transaction costs have to be low. 
C)  transaction costs have to be split evenly between all of the parties involved. 
D)  transaction costs are irrelevant.

Question 14

Pollution created by auto exhaust fumes is an example of a situation in which

Accepted Answer

A)  social costs are greater than private costs. 
B)  social costs are less than private costs. 
C)  social costs are equal to private costs. 
D)  social costs are approaching the shutdown point. 
A)  social costs are greater than private costs. 
B)  social costs are less than private costs. 
C)  social costs are equal to private costs. 
D)  social costs are approaching the shutdown point.

Question 15

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Technological change that made it easier to produce in a "cleaner" fashion would cause

Accepted Answer

A)  curve (4) to shift out, increasing the optimal amount of pollution abatement. 
B)  curve (3) to shift up, raising the marginal benefits and costs and reducing the amount of pollution abatement. 
C)  curve (2) to shift out, increasing the optimal amount of pollution abatement. 
D)  curve (1) to shift out, increasing the optimal amount of pollution abatement. 
A)  curve (4) to shift out, increasing the optimal amount of pollution abatement. 
B)  curve (3) to shift up, raising the marginal benefits and costs and reducing the amount of pollution abatement. 
C)  curve (2) to shift out, increasing the optimal amount of pollution abatement. 
D)  curve (1) to shift out, increasing the optimal amount of pollution abatement.

Question 16

When a person smokes a cigarette in his car and throws the butt out of the window, this is a(n)

Accepted Answer

A)  marginal cost. 
B)  external cost. 
C)  average total cost. 
D)  public cost. 
A)  marginal cost. 
B)  external cost. 
C)  average total cost. 
D)  public cost.

Question 17

Buffalo in the United States almost became extinct while cattle have never been close to extinction. The difference is due to

Accepted Answer

A)  the greater marginal value of a buffalo relative to a head of cattle, leading to greater "harvesting" of buffalo. 
B)  the use of private property rights on cattle and common property rights on buffalo. 
C)  the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of buffalo. 
D)  the differences in size between the two animals, and the effect of size differences on the costs of hunting them. 
A)  the greater marginal value of a buffalo relative to a head of cattle, leading to greater "harvesting" of buffalo. 
B)  the use of private property rights on cattle and common property rights on buffalo. 
C)  the greater marginal value of a head of cattle relative to buffalo, leading to over-hunting of buffalo. 
D)  the differences in size between the two animals, and the effect of size differences on the costs of hunting them.

Question 18

Why are externalities associated with common property rather than private property?

Accepted Answer

When private property rights exist, indi

Question 19

Where pollution is concerned, if an automobile driver considers only the internal costs of his actions, he is apt to

Accepted Answer

A)  use resources very carefully and in small quantities. 
B)  garage his car and drive very seldom. 
C)  be making a positive contribution to the greater community. 
D)  drive too much and use up more scarce resources than he would if he had to cover all his costs. 
A)  use resources very carefully and in small quantities. 
B)  garage his car and drive very seldom. 
C)  be making a positive contribution to the greater community. 
D)  drive too much and use up more scarce resources than he would if he had to cover all his costs.

Question 20

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Suppose the equilibrium is for a factory in Los Angeles. What would happen if the same factory were in the middle of Nevada?

Accepted Answer

A)  The marginal cost curve (1) would shift to (2) and there would be no difference in the level of abatement. 
B)  The marginal cost curve (2) would shift to the left and there would be less abatement in Nevada. 
C)  The marginal benefit curve (4) would shift to the left and there would be less abatement in Nevada. 
D)  The marginal benefit curve (2) would shift to the right and there would be more abatement in Nevada. 
A)  The marginal cost curve (1) would shift to (2) and there would be no difference in the level of abatement. 
B)  The marginal cost curve (2) would shift to the left and there would be less abatement in Nevada. 
C)  The marginal benefit curve (4) would shift to the left and there would be less abatement in Nevada. 
D)  The marginal benefit curve (2) would shift to the right and there would be more abatement in Nevada.

Exam 31: Environmental Economics

Which of the following is most likely to be private property?

Why is the optimal quantity of pollution not less than the point at which the marginal benefit equals the marginal cost?

Which of the following is most likely to be common property?

External costs are

Your neighbor has just planted some fragrant flowers. The wonderful scent drifts into your room and makes you happy.

Changing the ownership of the ocean from common property to private property would

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen

A difficulty with using a uniform per-unit tax to address a negative externality is that

The marginal cost curve of a firm measures

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

The marginal cost to society of reducing pollution increases with the increased use of pollution abatement because

For voluntary action to correct an externality,

Pollution created by auto exhaust fumes is an example of a situation in which

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Technological change that made it easier to produce in a "cleaner" fashion would cause

When a person smokes a cigarette in his car and throws the butt out of the window, this is a(n)

Buffalo in the United States almost became extinct while cattle have never been close to extinction. The difference is due to

Why are externalities associated with common property rather than private property?

Where pollution is concerned, if an automobile driver considers only the internal costs of his actions, he is apt to

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Suppose the equilibrium is for a factory in Los Angeles. What would happen if the same factory were in the middle of Nevada?

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

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