Question 1

As society is near total pollution abatement

Accepted Answer

A)  the marginal cost to society falls. 
B)  the marginal cost to society rises. 
C)  the marginal cost to society equals the marginal benefit to society. 
D)  the marginal cost to society falls but then rises. 
A)  the marginal cost to society falls. 
B)  the marginal cost to society rises. 
C)  the marginal cost to society equals the marginal benefit to society. 
D)  the marginal cost to society falls but then rises. B

Question 2

To totally internalize an externality, a government can levy a tax related only to the physical quantity of pollution if

Accepted Answer

A)  the economic damages associated with the pollution are different across different locations. 
B)  the economic damages are too large to be determined. 
C)  the economic damages associated with the pollution are the same across different locations. 
D)  the economic damages are zero. 
A)  the economic damages associated with the pollution are different across different locations. 
B)  the economic damages are too large to be determined. 
C)  the economic damages associated with the pollution are the same across different locations. 
D)  the economic damages are zero. C

Question 3

If the social costs of refining oil are greater than the private costs of oil refining, then

Accepted Answer

A)  the external costs of oil refining are greater than the social costs of oil refining. 
B)  users of products that use refined oil are paying too much for the products. 
C)  there is too much oil refining. 
D)  the amount of oil refining needs to increase in order to bring social costs and private costs in line with each other. 
A)  the external costs of oil refining are greater than the social costs of oil refining. 
B)  users of products that use refined oil are paying too much for the products. 
C)  there is too much oil refining. 
D)  the amount of oil refining needs to increase in order to bring social costs and private costs in line with each other. C

Question 4

Which of the following is a TRUE statement?

Accepted Answer

A)  Any property right system will yield a situation in which all externalities are internalized. 
B)  Voluntary agreements can always yield a situation in which all externalities are internalized. 
C)  Opportunity costs always exist with whoever has property rights. 
D)  Opportunity costs turn external costs into social costs. 
A)  Any property right system will yield a situation in which all externalities are internalized. 
B)  Voluntary agreements can always yield a situation in which all externalities are internalized. 
C)  Opportunity costs always exist with whoever has property rights. 
D)  Opportunity costs turn external costs into social costs.

Question 5

When a person does NOT have to pay the full costs for using a scarce resource, then

Accepted Answer

A)  the use of the resource is not affected since society pays for the resource. 
B)  more of the resource will be used. 
C)  the internal costs of using the resource are too high. 
D)  the social costs of the resource are less than they would be if the "correct" amount of the resource were being used. 
A)  the use of the resource is not affected since society pays for the resource. 
B)  more of the resource will be used. 
C)  the internal costs of using the resource are too high. 
D)  the social costs of the resource are less than they would be if the "correct" amount of the resource were being used.

Question 6

Which of the following statements is TRUE for society as a whole?

Accepted Answer

A)  Supply of services always reflects all social costs. 
B)  Demand for services always reflects all social costs. 
C)  Private costs are not always equal to social costs. 
D)  Social benefits are always emphasized in advertising. 
A)  Supply of services always reflects all social costs. 
B)  Demand for services always reflects all social costs. 
C)  Private costs are not always equal to social costs. 
D)  Social benefits are always emphasized in advertising.

Question 7

The sum of internal and external costs is

Accepted Answer

A)  externalities. 
B)  social costs. 
C)  internalities. 
D)  private costs. 
A)  externalities. 
B)  social costs. 
C)  internalities. 
D)  private costs.

Question 8

An externality that is NOT fully paid by the individual using an automobile is

Accepted Answer

A)  insurance for the vehicle. 
B)  gasoline for the vehicle. 
C)  air pollution from the vehicle. 
D)  operation of the vehicle. 
A)  insurance for the vehicle. 
B)  gasoline for the vehicle. 
C)  air pollution from the vehicle. 
D)  operation of the vehicle.

Question 9

Social costs are

Accepted Answer

A)  costs that are borne by the government. 
B)  the full cost borne by society whenever a resource use occurs. 
C)  borne by individuals who incur them. 
D)  borne by no one in society. 
A)  costs that are borne by the government. 
B)  the full cost borne by society whenever a resource use occurs. 
C)  borne by individuals who incur them. 
D)  borne by no one in society.

Question 10

For endangered species, the federal government

Accepted Answer

A)  can only protect the animal on federal property because of common property issues. 
B)  has the right to regulate activities on private land to save the species from extinction. 
C)  turns over the protection of an endangered species to the state authorities where the species lives. 
D)  will capture a pair of animals so that the species does not become extinct. 
A)  can only protect the animal on federal property because of common property issues. 
B)  has the right to regulate activities on private land to save the species from extinction. 
C)  turns over the protection of an endangered species to the state authorities where the species lives. 
D)  will capture a pair of animals so that the species does not become extinct.

Question 11

Suppose that the nation wide average cost of air pollution generated by a car is $1,000. Would a tax of $1,000 on every car induce people to take external costs into consideration and bring about the optimal price and output for autos? Explain.

Accepted Answer

Not necessarily. The $1,000 is an averag

Question 12

Voluntary agreements about cleaning up pollution attempt to

Accepted Answer

A)  internalize externalities. 
B)  internalize private costs. 
C)  externalize social costs. 
D)  externalize private costs. 
A)  internalize externalities. 
B)  internalize private costs. 
C)  externalize social costs. 
D)  externalize private costs.

Question 13

An example of the external costs due to automobile driving is

Accepted Answer

A)  wear and tear on toll roads. 
B)  the opportunity cost of the driver's time. 
C)  air pollution due to exhaust fumes. 
D)  the cost of washing dirty cars. 
A)  wear and tear on toll roads. 
B)  the opportunity cost of the driver's time. 
C)  air pollution due to exhaust fumes. 
D)  the cost of washing dirty cars.

Question 14

Which of the following statements is TRUE about the relationship among external, internal and social costs?

Accepted Answer

A)  External cost is the difference between social and internal costs. 
B)  Internal cost is the sum of social and external costs. 
C)  Social cost is the difference between internal and external costs. 
D)  none of the above 
A)  External cost is the difference between social and internal costs. 
B)  Internal cost is the sum of social and external costs. 
C)  Social cost is the difference between internal and external costs. 
D)  none of the above

Question 15

-In the above figure, S1 represents the supply curve which includes private costs, and S2 is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

Accepted Answer

A)  P1, Q4 
B)  P2, Q3 
C)  P4, Q1 
D)  P3, Q2 
A)  P1, Q4 
B)  P2, Q3 
C)  P4, Q1 
D)  P3, Q2

Question 16

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

Accepted Answer

A)  continuing to overproduce the good, lowering the price of the good, or cutting output. 
B)  reducing the pollution-causing activity, changing production techniques, or paying a price to pollute. 
C)  installing pollution abatement equipment, paying to pollute, or just ignoring the issue. 
D)  paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications. 
A)  continuing to overproduce the good, lowering the price of the good, or cutting output. 
B)  reducing the pollution-causing activity, changing production techniques, or paying a price to pollute. 
C)  installing pollution abatement equipment, paying to pollute, or just ignoring the issue. 
D)  paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications.

Question 17

Endangered species are likely to be

Accepted Answer

A)  private property. 
B)  common property. 
C)  both private and common property. 
D)  neither private nor common property. 
A)  private property. 
B)  common property. 
C)  both private and common property. 
D)  neither private nor common property.

Question 18

If a good is produced by firms that generate external costs, the price consumers pay

Accepted Answer

A)  will be efficient as long as it equals the marginal costs of the firms. 
B)  will be too low. 
C)  will be too high because the consumers end up paying the costs instead of the firm. 
D)  will be the correct price, but the quantity sold of the good will be too large. 
A)  will be efficient as long as it equals the marginal costs of the firms. 
B)  will be too low. 
C)  will be too high because the consumers end up paying the costs instead of the firm. 
D)  will be the correct price, but the quantity sold of the good will be too large.

Question 19

Private property rights involve

Accepted Answer

A)  exclusive rights to use, transfer, and exchange the property. 
B)  exclusive rights to use property, but not to exchange the property. 
C)  rights to enjoy the property in any way desired but not to transfer or exchange the property. 
D)  rights granted by the government for renewable terms of 100 years or more. 
A)  exclusive rights to use, transfer, and exchange the property. 
B)  exclusive rights to use property, but not to exchange the property. 
C)  rights to enjoy the property in any way desired but not to transfer or exchange the property. 
D)  rights granted by the government for renewable terms of 100 years or more.

Question 20

Why don't people take into consideration the external costs of their actions and reduce the amount of externalities?

Accepted Answer

People have no incentive to take into co

Exam 31: Environmental Economics

As society is near total pollution abatement

To totally internalize an externality, a government can levy a tax related only to the physical quantity of pollution if

If the social costs of refining oil are greater than the private costs of oil refining, then

Which of the following is a TRUE statement?

When a person does NOT have to pay the full costs for using a scarce resource, then

Which of the following statements is TRUE for society as a whole?

The sum of internal and external costs is

An externality that is NOT fully paid by the individual using an automobile is

Social costs are

For endangered species, the federal government

Suppose that the nation wide average cost of air pollution generated by a car is $1,000. Would a tax of $1,000 on every car induce people to take external costs into consideration and bring about the optimal price and output for autos? Explain.

Voluntary agreements about cleaning up pollution attempt to

An example of the external costs due to automobile driving is

Which of the following statements is TRUE about the relationship among external, internal and social costs?

-In the above figure, S1 represents the supply curve which includes private costs, and S2 is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

Endangered species are likely to be

If a good is produced by firms that generate external costs, the price consumers pay

Private property rights involve

Why don't people take into consideration the external costs of their actions and reduce the amount of externalities?

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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