Question 1

Should the level of pollution be reduced to zero and if not,then to what level?

Accepted Answer

No,the level of pollution should not be

Question 2

Figure 5-2  
 Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The deadweight loss due to the externality is represented by the area

Accepted Answer

A)  abc. 
B)  abf. 
C)  abd. 
D)  ade. 
A)  abc. 
B)  abf. 
C)  abd. 
D)  ade.

Question 3

Because producers do not bear the external cost of pollution

Accepted Answer

A)  the economically efficient level of production is achieved. 
B)  private production is below the economically efficient level. 
C)  private production exceeds the economically efficient level. 
D)  the market price is too high. 
A)  the economically efficient level of production is achieved. 
B)  private production is below the economically efficient level. 
C)  private production exceeds the economically efficient level. 
D)  the market price is too high.

Question 4

A product is considered to be nonexcludable if

Accepted Answer

A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community. 
A)  you can keep those who did not pay for the item from enjoying its benefits. 
B)  you cannot keep those who did not pay for the item from enjoying its benefits. 
C)  your consumption of the product reduces the quantity available for others to consume. 
D)  it is jointly owned by all members of a community.

Question 5

Figure 5-1  
 Figure 5-1 shows a market with an externality. The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output. The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 5-1.If,because of an externality,the economically efficient output is Q2 and not the current equilibrium output of Q1,what does S1 represent?

Accepted Answer

A)  the market supply curve reflecting external cost 
B)  the market supply curve reflecting implicit cost 
C)  the market supply curve reflecting social cost 
D)  the market supply curve reflecting private cost 
A)  the market supply curve reflecting external cost 
B)  the market supply curve reflecting implicit cost 
C)  the market supply curve reflecting social cost 
D)  the market supply curve reflecting private cost

Question 6

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

Accepted Answer

A)  public goods 
B)  private goods 
C)  quasi-public goods 
D)  common resources 
A)  public goods 
B)  private goods 
C)  quasi-public goods 
D)  common resources

Question 8

Some critics of the U.S.Environmental Protection Agency's proposed NSPS air pollution regulations which are designed to reduce carbon dioxide emissions argue that the policy will

Accepted Answer

A)  significantly increase electric utility rates. 
B)  ultimately result in an increase in carbon dioxide emissions. 
C)  increase greenhouse gases in exchange for the reduction of carbon dioxide. 
D)  result in an increase in the consumption of fossil fuels. 
A)  significantly increase electric utility rates. 
B)  ultimately result in an increase in carbon dioxide emissions. 
C)  increase greenhouse gases in exchange for the reduction of carbon dioxide. 
D)  result in an increase in the consumption of fossil fuels.

Question 9

Figure 5-3  
-Refer to Figure 5-3.The private profit maximizing output level is

Accepted Answer

A)  Qm. 
B)  Qn. 
C)  Qo. 
D)  Qo - Qm. 
A)  Qm. 
B)  Qn. 
C)  Qo. 
D)  Qo - Qm.

Question 10

Figure 5-4  
-Refer to Figure 5-4.What is the incremental benefit of increasing the quantity of pollution reduction from QB to QE units?

Accepted Answer

A)  PF 
B)  PF × QE 
C)  the value of the area BEF 
D)  the value of the area QBBFQE 
A)  PF 
B)  PF × QE 
C)  the value of the area BEF 
D)  the value of the area QBBFQE

Question 11

Consider the following methods of pollution reduction: 
a.the government sets a target for maximum emissions
b.the government mandates the installation of specific pollution abatement equipment
c.the government imposes a per unit tax on the good that creates pollution
d.the government gives firms a tax rebate for every unit of pollution abated
Which of the above is an example of a command and control approach to reducing pollution?

Accepted Answer

A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and d only 
E)  a, b, c, and d 
A)  a only 
B)  b only 
C)  a and b only 
D)  a, b, and d only 
E)  a, b, c, and d

Question 12

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.

Accepted Answer

A) True 
 B)False

Question 13

The private cost of a good or service is the cost borne by the producer.

Accepted Answer

A) True 
 B)False

Question 14

Conceptually,the efficient level of carbon emissions is the level for which

Accepted Answer

A)  the marginal benefit of reducing carbon emissions is maximized. 
B)  the marginal cost of reducing carbon emissions is minimized. 
C)  the marginal benefit of reducing carbon emissions is equal to the cost of reducing carbon emissions. 
D)  the marginal benefit of reducing carbon emissions is minimized and the marginal cost of reducing carbon emissions is maximized. 
A)  the marginal benefit of reducing carbon emissions is maximized. 
B)  the marginal cost of reducing carbon emissions is minimized. 
C)  the marginal benefit of reducing carbon emissions is equal to the cost of reducing carbon emissions. 
D)  the marginal benefit of reducing carbon emissions is minimized and the marginal cost of reducing carbon emissions is maximized.

Question 15

When there is a negative externality,the competitive output is more than the economically efficient output level.

Accepted Answer

A) True 
 B)False

Question 16

Figure 5-4  
-Refer to Figure 5-4.The marginal cost of reducing pollution curve is the same curve as

Accepted Answer

A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve. 
A)  the supply of pollution reduction curve. 
B)  the demand for pollution reduction curve. 
C)  the negative externality curve. 
D)  the value of pollution reduction curve.

Question 17

Figure 5-2  
 Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The efficient output level is

Accepted Answer

A)  Qd. 
B)  Qb. 
C)  Qa. 
D)  Qb - Qd. 
A)  Qd. 
B)  Qb. 
C)  Qa. 
D)  Qb - Qd.

Question 18

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

Accepted Answer

A)  Yes, if each contributes $50, then each stands to gain a consumer surplus. 
B)  No, because each will wait for the other to hire the housecleaner. 
C)  Yes, but only if a housecleaner will accept $50 so that each can take turns to pay the housecleaner. 
D)  No, because it will be difficult for them to agree on which housecleaning service to use. 
A)  Yes, if each contributes $50, then each stands to gain a consumer surplus. 
B)  No, because each will wait for the other to hire the housecleaner. 
C)  Yes, but only if a housecleaner will accept $50 so that each can take turns to pay the housecleaner. 
D)  No, because it will be difficult for them to agree on which housecleaning service to use.

Question 19

Governments can increase the consumption of a product that creates positive externalities by

Accepted Answer

A)  subsidizing the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the good. 
D)  assigning property rights to the producers of the product. 
A)  subsidizing the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the good. 
D)  assigning property rights to the producers of the product.

Question 20

Private costs

Accepted Answer

A)  are borne by producers of a good while social costs are borne by government. 
B)  are borne by consumers of a good while social costs are borne by government. 
C)  are borne by producers of a good while social costs are borne by society at large. 
D)  are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good. 
A)  are borne by producers of a good while social costs are borne by government. 
B)  are borne by consumers of a good while social costs are borne by government. 
C)  are borne by producers of a good while social costs are borne by society at large. 
D)  are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.

Exam 5: Externalities, environmental Policy, and Public Goods

Should the level of pollution be reduced to zero and if not,then to what level?

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The deadweight loss due to the externality is represented by the area

Because producers do not bear the external cost of pollution

A product is considered to be nonexcludable if

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Which of the following displays these two characteristics: nonrivalry and nonexcludability in consumption?

Some critics of the U.S.Environmental Protection Agency's proposed NSPS air pollution regulations which are designed to reduce carbon dioxide emissions argue that the policy will

Figure 5-3 -Refer to Figure 5-3.The private profit maximizing output level is

Figure 5-4 -Refer to Figure 5-4.What is the incremental benefit of increasing the quantity of pollution reduction from QB to QE units?

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.

The private cost of a good or service is the cost borne by the producer.

Conceptually,the efficient level of carbon emissions is the level for which

When there is a negative externality,the competitive output is more than the economically efficient output level.

Figure 5-4 -Refer to Figure 5-4.The marginal cost of reducing pollution curve is the same curve as

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The efficient output level is

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

Governments can increase the consumption of a product that creates positive externalities by

Private costs

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Figure 5-4 -Refer to Figure 5-4.What is the incremental benefit of increasing the quantity of pollution reduction from Q_B to Q_E units?