Question 1

If social cost exceeds private cost, there is

Accepted Answer

A)  underproduction of a good. 
B)  a negative externality. 
C)  a positive externality. 
D)  too little economic profit in the activity. 
A)  underproduction of a good. 
B)  a negative externality. 
C)  a positive externality. 
D)  too little economic profit in the activity.

Question 2

When a person can pass some of her costs of using a resource on to someone else,

Accepted Answer

A)  the use of the resource is not affected by her actions. 
B)  the internal costs of using the resource exceed the private costs. 
C)  she uses too much of the resource. 
D)  she uses too little of the resource. 
A)  the use of the resource is not affected by her actions. 
B)  the internal costs of using the resource exceed the private costs. 
C)  she uses too much of the resource. 
D)  she uses too little of the resource.

Question 3

The idea that it takes 80 percent of your time to clean up the last 5 percent of your house illustrates that

Accepted Answer

A)  the marginal cost of cleaning up slopes downward. 
B)  the marginal cost of cleaning up slopes upward. 
C)  the marginal benefit of cleaning up is constant. 
D)  the marginal benefit of cleaning up slopes upward. 
A)  the marginal cost of cleaning up slopes downward. 
B)  the marginal cost of cleaning up slopes upward. 
C)  the marginal benefit of cleaning up is constant. 
D)  the marginal benefit of cleaning up slopes upward.

Question 4

The 1997 Kyoto Protocol was signed by

Accepted Answer

A)  only the United States and the European Union. 
B)  only nations in Asia. 
C)  more than three dozen nations. 
D)  all nations in the world. 
A)  only the United States and the European Union. 
B)  only nations in Asia. 
C)  more than three dozen nations. 
D)  all nations in the world.

Question 5

A situation in which a private cost diverges from a social cost is

Accepted Answer

A)  internal costs. 
B)  an externality. 
C)  an internality. 
D)  a transactions cost. 
A)  internal costs. 
B)  an externality. 
C)  an internality. 
D)  a transactions cost.

Question 6

Which of the following are most likely to become an endangered species?

Accepted Answer

A)  animals in the wild 
B)  domesticated animals 
C)  animals that people like to keep at home as pets 
D)  animals that people have property rights to own 
A)  animals in the wild 
B)  domesticated animals 
C)  animals that people like to keep at home as pets 
D)  animals that people have property rights to own

Question 7

-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 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 8

The marginal cost of pollution abatement is the

Accepted Answer

A)  additional cost to clean up an additional unit of pollution. 
B)  additional benefit from cleaning up an additional unit of pollution. 
C)  total social costs of pollution clean-up divided by total social benefits. 
D)  total social costs of pollution clean-up divided by the total units of clean-up. 
A)  additional cost to clean up an additional unit of pollution. 
B)  additional benefit from cleaning up an additional unit of pollution. 
C)  total social costs of pollution clean-up divided by total social benefits. 
D)  total social costs of pollution clean-up divided by the total units of clean-up.

Question 9

"The optimal level of pollution is zero." Do you agree or disagree? Why?

Accepted Answer

Disagree. There are costs to cleaning up

Question 10

Explain how the optimal quantity of air pollution is determined.

Accepted Answer

As the air becomes cleaner, the marginal

Question 11

-Refer to the above figure. The marginal cost of pollution abatement is curve

Accepted Answer

A)  (1). 
B)  (2). 
C)  (3). 
D)  (4). 
A)  (1). 
B)  (2). 
C)  (3). 
D)  (4).

Question 12

A situation in where the costs of an action are NOT fully borne by the two parties engaged in exchange is

Accepted Answer

A)  an externality. 
B)  an internality. 
C)  internal costs. 
D)  a transactions cost. 
A)  an externality. 
B)  an internality. 
C)  internal costs. 
D)  a transactions cost.

Question 13

A good that has social costs that are less than private costs has a quantity that is

Accepted Answer

A)  too high. 
B)  too low. 
C)  just right. 
D)  equal to zero. 
A)  too high. 
B)  too low. 
C)  just right. 
D)  equal to zero.

Question 14

Property that is owned by everyone and therefore by no one in particular is referred to as

Accepted Answer

A)  common property. 
B)  social property. 
C)  private property. 
D)  free property. 
A)  common property. 
B)  social property. 
C)  private property. 
D)  free property.

Question 15

Generally, as levels of pollution are reduced

Accepted Answer

A)  marginal benefits from the reduction decrease. 
B)  marginal benefits from the reduction increase. 
C)  marginal costs from the reduction decrease. 
D)  marginal benefits totally offset marginal costs. 
A)  marginal benefits from the reduction decrease. 
B)  marginal benefits from the reduction increase. 
C)  marginal costs from the reduction decrease. 
D)  marginal benefits totally offset marginal costs.

Question 16

All of the following are private costs of operating an automobile EXCEPT

Accepted Answer

A)  gasoline for the car. 
B)  depreciation of the vehicle. 
C)  car insurance. 
D)  harm to the environment from emissions. 
A)  gasoline for the car. 
B)  depreciation of the vehicle. 
C)  car insurance. 
D)  harm to the environment from emissions.

Question 17

Today, the earth has ________ of all of the species that have ever lived.

Accepted Answer

A)  less than 1 percent 
B)  about 50 percent 
C)  about 99 percent 
D)  100 percent 
A)  less than 1 percent 
B)  about 50 percent 
C)  about 99 percent 
D)  100 percent

Question 18

All the costs associated with making, reaching, and enforcing agreements are called

Accepted Answer

A)  private costs. 
B)  opportunity costs. 
C)  transaction costs. 
D)  social costs. 
A)  private costs. 
B)  opportunity costs. 
C)  transaction costs. 
D)  social costs.

Question 19

Which of the following is FALSE?

Accepted Answer

A)  Social costs do not include private costs. 
B)  Private costs do not include external costs. 
C)  If social costs are greater than private costs, "too much" of a good is being produced. 
D)  Pollution is a social cost. 
A)  Social costs do not include private costs. 
B)  Private costs do not include external costs. 
C)  If social costs are greater than private costs, "too much" of a good is being produced. 
D)  Pollution is a social cost.

Question 20

A social cost that is NOT fully paid by the individual using an automobile is

Accepted Answer

A)  traffic congestion. 
B)  gasoline and oil. 
C)  insurance. 
D)  depreciation of the vehicle. 
A)  traffic congestion. 
B)  gasoline and oil. 
C)  insurance. 
D)  depreciation of the vehicle.

Exam 31: Environmental Economics

If social cost exceeds private cost, there is

When a person can pass some of her costs of using a resource on to someone else,

The idea that it takes 80 percent of your time to clean up the last 5 percent of your house illustrates that

The 1997 Kyoto Protocol was signed by

A situation in which a private cost diverges from a social cost is

Which of the following are most likely to become an endangered species?

-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 have to pay, what will be the equilibrium price and quantity?

The marginal cost of pollution abatement is the

"The optimal level of pollution is zero." Do you agree or disagree? Why?

Explain how the optimal quantity of air pollution is determined.

-Refer to the above figure. The marginal cost of pollution abatement is curve

A situation in where the costs of an action are NOT fully borne by the two parties engaged in exchange is

A good that has social costs that are less than private costs has a quantity that is

Property that is owned by everyone and therefore by no one in particular is referred to as

Generally, as levels of pollution are reduced

All of the following are private costs of operating an automobile EXCEPT

Today, the earth has ________ of all of the species that have ever lived.

All the costs associated with making, reaching, and enforcing agreements are called

Which of the following is FALSE?

A social cost that is NOT fully paid by the individual using an automobile is

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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