Question 1

Exhibit 17-9  
-In Exhibit 17-9,the welfare loss (from society's perspective)that results from 6 units of water quality is shown by area

Accepted Answer

A) $5,000 
B) $10,000 
C) $15,000 
D) $20,000 
E) $25,000 
A) $5,000 
B) $10,000 
C) $15,000 
D) $20,000 
E) $25,000

Question 2

Economists view pollution as an economic problem that arises because

Accepted Answer

A) private enterprise always minimizes the amount of pollution produced 
B) profitable firms rarely pollute 
C) as the economy grows,the level of pollution declines 
D) firms that pollute do not pay the full social cost of producing their output 
E) pollution costs are borne by the consumer 
A) private enterprise always minimizes the amount of pollution produced 
B) profitable firms rarely pollute 
C) as the economy grows,the level of pollution declines 
D) firms that pollute do not pay the full social cost of producing their output 
E) pollution costs are borne by the consumer

Question 3

The optimal level of water and air quality

Accepted Answer

A) is zero,which is a pollution-free environment 
B) occurs when the marginal private cost of air quality equals its marginal social cost 
C) is greater if the marginal social cost curve of air quality shifts downward 
D) occurs when all negative externalities are eliminated 
E) eliminates the common pool problem 
A) is zero,which is a pollution-free environment 
B) occurs when the marginal private cost of air quality equals its marginal social cost 
C) is greater if the marginal social cost curve of air quality shifts downward 
D) occurs when all negative externalities are eliminated 
E) eliminates the common pool problem

Question 4

Exhibit 17-8  
-Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions on the marginal social benefit of education,what would be the social gain?

Accepted Answer

A) $1,000 
B) $2,000 
C) $3,000 
D) $4,000 
E) $5,000 
A) $1,000 
B) $2,000 
C) $3,000 
D) $4,000 
E) $5,000

Question 5

Unpriced by-products of production or consumption that provide benefits to other consumers or other firms are known as

Accepted Answer

A) negative externalities 
B) common pool benefits 
C) positive externalities 
D) private benefits 
E) Coase by-products 
A) negative externalities 
B) common pool benefits 
C) positive externalities 
D) private benefits 
E) Coase by-products

Question 6

When competitive market equilibrium determines a level of output for which the marginal social cost exceeds the marginal social benefit,the private equilibrium results in

Accepted Answer

A) a positive externality 
B) a Coase equilibrium 
C) underproduction of the product 
D) a market failure 
E) external benefits 
A) a positive externality 
B) a Coase equilibrium 
C) underproduction of the product 
D) a market failure 
E) external benefits

Question 7

The Coase solution to the externality problem only works when bargaining costs are high.

Accepted Answer

A) True 
 B)False

Question 8

A metal-stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to nap.It would cost the factory $5 million to move; it would cost $1 million for the day care center to move.Sound insulation for the factory costs $1 million; insulation for the day care center costs $200,000.The court determines that the day care center has the property right.What would be the optimal solution to this problem?

Accepted Answer

A) The factory should install sound insulation because that is cheaper than moving. 
B) The factory should pay the day care center to move. 
C) The factory should buy insulation for the day care center. 
D) The day care center should buy its own insulation. 
E) The day care center should move. 
A) The factory should install sound insulation because that is cheaper than moving. 
B) The factory should pay the day care center to move. 
C) The factory should buy insulation for the day care center. 
D) The day care center should buy its own insulation. 
E) The day care center should move.

Question 9

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans,chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

Accepted Answer

A) True 
 B)False

Question 10

Most of the Superfund has been spent on

Accepted Answer

A) education of the public on environmental issues 
B) research 
C) court costs and legal fees 
D) cleanup and rehabilitation of polluted areas 
E) development and installation of antipollution devices 
A) education of the public on environmental issues 
B) research 
C) court costs and legal fees 
D) cleanup and rehabilitation of polluted areas 
E) development and installation of antipollution devices

Question 11

Exhibit 17-2  
-In Exhibit 17-2,the market equilibrium price and output (determined exclusively by private decisions)are

Accepted Answer

A) $6 and 50 units,respectively 
B) $12 and 50 units,respectively 
C) $12 and 40 units,respectively 
D) $6 and 40 units,respectively 
E) not indicated 
A) $6 and 50 units,respectively 
B) $12 and 50 units,respectively 
C) $12 and 40 units,respectively 
D) $6 and 40 units,respectively 
E) not indicated

Question 12

Depletion of tropical rainforests is an example of

Accepted Answer

A) a negative externality 
B) the use of variable technology 
C) adverse selection 
D) the use of fixed technology 
E) a clearly defined property right 
A) a negative externality 
B) the use of variable technology 
C) adverse selection 
D) the use of fixed technology 
E) a clearly defined property right

Question 13

When the free market produces less than the socially optimal quantity of a good,

Accepted Answer

A) negative externalities must be present 
B) marginal social cost must exceed marginal private cost 
C) marginal private benefit must exceed marginal social benefit 
D) the government should tax production of the good 
E) there has been a market failure 
A) negative externalities must be present 
B) marginal social cost must exceed marginal private cost 
C) marginal private benefit must exceed marginal social benefit 
D) the government should tax production of the good 
E) there has been a market failure

Question 14

Markets for pollution rights

Accepted Answer

A) have never been tried in the United States 
B) assign property rights to those who value them least 
C) allow the government to assign property rights 
D) enable those who value them most to pollute 
E) are less efficient than pollution standards 
A) have never been tried in the United States 
B) assign property rights to those who value them least 
C) allow the government to assign property rights 
D) enable those who value them most to pollute 
E) are less efficient than pollution standards

Question 15

In the United States,what percentage of smog comes from automobiles?

Accepted Answer

A) 5 percent 
B) 15 percent 
C) 25 percent 
D) 40 percent 
E) 80 percent 
A) 5 percent 
B) 15 percent 
C) 25 percent 
D) 40 percent 
E) 80 percent

Question 16

In a free market,a firm's rate of output is determined

Accepted Answer

A) where marginal social cost equals marginal social benefit 
B) where marginal private benefit equals marginal social benefit 
C) where marginal social cost equals marginal private cost 
D) where marginal private cost equals marginal private benefit 
E) by government 
A) where marginal social cost equals marginal social benefit 
B) where marginal private benefit equals marginal social benefit 
C) where marginal social cost equals marginal private cost 
D) where marginal private cost equals marginal private benefit 
E) by government

Question 17

The destruction of tropical rain forests results in

Accepted Answer

A) a possible decrease in the greenhouse effect 
B) a decrease in gases in the atmosphere 
C) a decrease in the recycling of carbon dioxide 
D) reduced erosion 
E) better long-term growth prospects in the local economy 
A) a possible decrease in the greenhouse effect 
B) a decrease in gases in the atmosphere 
C) a decrease in the recycling of carbon dioxide 
D) reduced erosion 
E) better long-term growth prospects in the local economy

Question 18

Fish are

Accepted Answer

A) always renewable resources 
B) renewable resources whenever property rights are well defined 
C) renewable resources if they are taken and replaced at rates that provide a steady supply 
D) renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E) renewable resources whenever property rights are well defined and can be easily enforced 
A) always renewable resources 
B) renewable resources whenever property rights are well defined 
C) renewable resources if they are taken and replaced at rates that provide a steady supply 
D) renewable resources only if they are replaced at a rate that exceeds the rate at which they are caught 
E) renewable resources whenever property rights are well defined and can be easily enforced

Question 19

Exhibit 17-2  
-In Exhibit 17-2,the socially efficient price and level of output are

Accepted Answer

A) $6 and 50 units,respectively 
B) $12 and 50 units,respectively 
C) $12 and 40 units,respectively 
D) $6 and 40 units,respectively 
E) not indicated 
A) $6 and 50 units,respectively 
B) $12 and 50 units,respectively 
C) $12 and 40 units,respectively 
D) $6 and 40 units,respectively 
E) not indicated

Question 20

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of

Accepted Answer

A) positive externalities as long as bargaining costs are small 
B) negative externalities as long as bargaining costs are small 
C) negative externalities as long as bargaining costs are great 
D) any type of market failure 
E) any type of market failure that involves high transaction costs 
A) positive externalities as long as bargaining costs are small 
B) negative externalities as long as bargaining costs are small 
C) negative externalities as long as bargaining costs are great 
D) any type of market failure 
E) any type of market failure that involves high transaction costs

Exam 19: Externalities and the Environment

Exhibit 17-9 -In Exhibit 17-9,the welfare loss (from society's perspective)that results from 6 units of water quality is shown by area

Economists view pollution as an economic problem that arises because

The optimal level of water and air quality

Exhibit 17-8 -Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions on the marginal social benefit of education,what would be the social gain?

Unpriced by-products of production or consumption that provide benefits to other consumers or other firms are known as

When competitive market equilibrium determines a level of output for which the marginal social cost exceeds the marginal social benefit,the private equilibrium results in

The Coase solution to the externality problem only works when bargaining costs are high.

If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans,chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.

Most of the Superfund has been spent on

Exhibit 17-2 -In Exhibit 17-2,the market equilibrium price and output (determined exclusively by private decisions)are

Depletion of tropical rainforests is an example of

When the free market produces less than the socially optimal quantity of a good,

Markets for pollution rights

In the United States,what percentage of smog comes from automobiles?

In a free market,a firm's rate of output is determined

The destruction of tropical rain forests results in

Fish are

Exhibit 17-2 -In Exhibit 17-2,the socially efficient price and level of output are

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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