Question 1

When a resource is an open-access resource,

Accepted Answer

A) each individual in the society owns it 
B) the group owns it 
C) no one owns it 
D) the government owns it 
E) some nonprofit agency owns it 
A) each individual in the society owns it 
B) the group owns it 
C) no one owns it 
D) the government owns it 
E) some nonprofit agency owns it

Question 2

The Clean Air Act of 1970 has

Accepted Answer

A) been ineffective in reducing lead emissions in automobiles 
B) actually caused an increase in auto emissions 
C) been fairly successful in reducing auto emissions,especially lead 
D) been unsuccessful in reducing auto emissions,especially sulfur oxides 
E) been ineffective in reducing carbon monoxide emissions from autos 
A) been ineffective in reducing lead emissions in automobiles 
B) actually caused an increase in auto emissions 
C) been fairly successful in reducing auto emissions,especially lead 
D) been unsuccessful in reducing auto emissions,especially sulfur oxides 
E) been ineffective in reducing carbon monoxide emissions from autos

Question 3

Open-access resources tend to be

Accepted Answer

A) conserved 
B) taxed 
C) overused 
D) efficiently used 
E) used in an environmentally sound manner 
A) conserved 
B) taxed 
C) overused 
D) efficiently used 
E) used in an environmentally sound manner

Question 4

The optimal level of air quality

Accepted Answer

A) is 100 percent,which creates a pollution-free environment 
B) is smaller the lower the marginal social cost of air quality 
C) is greater the lower the marginal social benefit of air quality 
D) is greater the lower the marginal social cost of air quality 
E) is smaller the greater the marginal social benefit of air quality 
A) is 100 percent,which creates a pollution-free environment 
B) is smaller the lower the marginal social cost of air quality 
C) is greater the lower the marginal social benefit of air quality 
D) is greater the lower the marginal social cost of air quality 
E) is smaller the greater the marginal social benefit of air quality

Question 5

The Superfund was designed to clean up

Accepted Answer

A) the acid rain problem 
B) air pollution from automobiles,buses,and trucks 
C) water pollution from agricultural sources (i.e.,pesticides) 
D) water pollution from dumping raw sewage 
E) toxic waste dumps 
A) the acid rain problem 
B) air pollution from automobiles,buses,and trucks 
C) water pollution from agricultural sources (i.e.,pesticides) 
D) water pollution from dumping raw sewage 
E) toxic waste dumps

Question 6

Marginal social cost is equal to

Accepted Answer

A) total private cost 
B) marginal private cost 
C) marginal external cost 
D) marginal private cost plus marginal external cost 
E) marginal private cost divided by marginal external cost 
A) total private cost 
B) marginal private cost 
C) marginal external cost 
D) marginal private cost plus marginal external cost 
E) marginal private cost divided by marginal external cost

Question 7

To enhance social welfare,the government should encourage the production of

Accepted Answer

A) all goods 
B) no goods 
C) goods that provide positive externalities 
D) goods whose social cost exceeds their private cost 
E) goods that provide negative externalities 
A) all goods 
B) no goods 
C) goods that provide positive externalities 
D) goods whose social cost exceeds their private cost 
E) goods that provide negative externalities

Question 8

To achieve the socially optimal level of pollution,the biggest polluters should be targetted for the greates reduction in pollution.

Accepted Answer

A) True 
 B)False

Question 9

A meditation class meets on the second floor of a building; the first floor is a nightclub.The loud music from the club disturbs the classes.The club could be soundproofed for a cost of $5,000 or move at a cost of $8,000.The class can't soundproof enough to overcome the music,but could be moved for $4,000.According to Coase,a socially optimal solution can be achieved if

Accepted Answer

A) the local government purchases the building 
B) the building is torn down 
C) property rights to be noisy are granted to the nightclub 
D) property rights to a quiet environment are granted to the meditation class 
E) both the nightclub and the meditation class relocate 
A) the local government purchases the building 
B) the building is torn down 
C) property rights to be noisy are granted to the nightclub 
D) property rights to a quiet environment are granted to the meditation class 
E) both the nightclub and the meditation class relocate

Question 10

Which of the following responses to a positive externality enhances society's welfare?

Accepted Answer

A) taxes 
B) subsidies 
C) effluent fees 
D) quotas 
E) a cut in funding 
A) taxes 
B) subsidies 
C) effluent fees 
D) quotas 
E) a cut in funding

Question 11

The optimal level of pollution is

Accepted Answer

A) zero 
B) the level at which the marginal social cost of air quality equals the marginal social benefit 
C) the level at which the average social cost of air quality equals the average social benefit 
D) the level at which the total social cost of air quality equals the total social benefit 
E) the level at which the marginal social cost of air quality is minimized 
A) zero 
B) the level at which the marginal social cost of air quality equals the marginal social benefit 
C) the level at which the average social cost of air quality equals the average social benefit 
D) the level at which the total social cost of air quality equals the total social benefit 
E) the level at which the marginal social cost of air quality is minimized

Question 12

The common pool problem

Accepted Answer

A) occurs whenever goods are not rivals in consumption 
B) is an example of adverse selection 
C) arises whenever property rights are well defined 
D) is usually caused by government intervention into private markets 
E) is one in which resources to which access is unrestricted will tend to be overused 
A) occurs whenever goods are not rivals in consumption 
B) is an example of adverse selection 
C) arises whenever property rights are well defined 
D) is usually caused by government intervention into private markets 
E) is one in which resources to which access is unrestricted will tend to be overused

Question 13

Which of the following has not contributed to the high rate of tropical deforestation?

Accepted Answer

A) a lack of property rights to forests and trees 
B) a shortage of farmland 
C) banks' forgiveness of the debts of less-developed economies 
D) high demand for lumber 
E) high demand for beef and other ranch products 
A) a lack of property rights to forests and trees 
B) a shortage of farmland 
C) banks' forgiveness of the debts of less-developed economies 
D) high demand for lumber 
E) high demand for beef and other ranch products

Question 14

In order to increase society's well-being,measles vaccinations might be

Accepted Answer

A) taxed to discourage production 
B) subsidized to encourage production 
C) taxed to encourage production 
D) subsidized to discourage production 
E) provided without government intervention 
A) taxed to discourage production 
B) subsidized to encourage production 
C) taxed to encourage production 
D) subsidized to discourage production 
E) provided without government intervention

Question 15

Rainforests are often cut down because

Accepted Answer

A) farmers and the government are greedy 
B) the countries involved do not understand the environment 
C) the countries involved are gaining short-term relief from poverty at the cost of long-term environmental preservation 
D) the countries involved are gaining long-term environmental benefits by doing so 
E) cutting them down results in less erosion 
A) farmers and the government are greedy 
B) the countries involved do not understand the environment 
C) the countries involved are gaining short-term relief from poverty at the cost of long-term environmental preservation 
D) the countries involved are gaining long-term environmental benefits by doing so 
E) cutting them down results in less erosion

Question 16

Deforestation is occurring in tropical areas because

Accepted Answer

A) long-run economic considerations outweigh short-run considerations 
B) global economic considerations outweigh domestic considerations 
C) tropical soil is good for growing farm crops 
D) the value of jobs created by deforestation exceeds the cost to society 
E) there is no property right to the earth's climate 
A) long-run economic considerations outweigh short-run considerations 
B) global economic considerations outweigh domestic considerations 
C) tropical soil is good for growing farm crops 
D) the value of jobs created by deforestation exceeds the cost to society 
E) there is no property right to the earth's climate

Question 17

If a private market determines the quantity of smallpox vaccinations,which of the following is true?

Accepted Answer

A) The equilibrium quantity is too low for efficiency. 
B) The equilibrium price and quantity are too high for efficiency. 
C) The equilibrium price is efficient. 
D) The equilibrium quantity is too high for efficiency. 
E) The equilibrium price and quantity are efficient. 
A) The equilibrium quantity is too low for efficiency. 
B) The equilibrium price and quantity are too high for efficiency. 
C) The equilibrium price is efficient. 
D) The equilibrium quantity is too high for efficiency. 
E) The equilibrium price and quantity are efficient.

Question 18

According to the Coase theorem,in order to solve a negative externality problem efficiently,

Accepted Answer

A) the property right must be assigned to the party with the least-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) transaction costs must be high 
D) transaction costs must be low 
E) property rights must be determined by the courts 
A) the property right must be assigned to the party with the least-cost alternative 
B) the property right must be assigned to the victim of pollution 
C) transaction costs must be high 
D) transaction costs must be low 
E) property rights must be determined by the courts

Question 19

The Coase theorem says that,if the appropriate property right is assigned to __________,an efficient solution to an externality problem will be achieved.

Accepted Answer

A) the party causing the externality 
B) the victim of the externality 
C) the party that can avoid the externality at the higher cost 
D) the party that can avoid the externality at the lower cost 
E) either one of the parties involved 
A) the party causing the externality 
B) the victim of the externality 
C) the party that can avoid the externality at the higher cost 
D) the party that can avoid the externality at the lower cost 
E) either one of the parties involved

Question 20

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it,social welfare is

Accepted Answer

A) increased by reducing output 
B) decreased by expanding output 
C) unchanged by expanding or reducing output 
D) increased by expanding output 
E) maximized 
A) increased by reducing output 
B) decreased by expanding output 
C) unchanged by expanding or reducing output 
D) increased by expanding output 
E) maximized

Exam 19: Externalities and the Environment

When a resource is an open-access resource,

The Clean Air Act of 1970 has

Open-access resources tend to be

The optimal level of air quality

The Superfund was designed to clean up

Marginal social cost is equal to

To enhance social welfare,the government should encourage the production of

To achieve the socially optimal level of pollution,the biggest polluters should be targetted for the greates reduction in pollution.

Which of the following responses to a positive externality enhances society's welfare?

The optimal level of pollution is

The common pool problem

Which of the following has not contributed to the high rate of tropical deforestation?

In order to increase society's well-being,measles vaccinations might be

Rainforests are often cut down because

Deforestation is occurring in tropical areas because

If a private market determines the quantity of smallpox vaccinations,which of the following is true?

According to the Coase theorem,in order to solve a negative externality problem efficiently,

The Coase theorem says that,if the appropriate property right is assigned to __________,an efficient solution to an externality problem will be achieved.

If the marginal social benefit of consuming a product exceeds the marginal social cost of producing it,social welfare is

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