Question 1

Costs that are borne solely by the individuals who incur them are

Accepted Answer

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

Question 2

The marginal benefit of pollution abatement

Accepted Answer

A)  increases at an increasing rate as abatement increases. 
B)  decreases as pollution abatement increases because of the law of diminishing marginal utility. 
C)  increases as pollution abatement increases because of the law of increasing marginal returns. 
D)  is constant as pollution abatement increases. 
A)  increases at an increasing rate as abatement increases. 
B)  decreases as pollution abatement increases because of the law of diminishing marginal utility. 
C)  increases as pollution abatement increases because of the law of increasing marginal returns. 
D)  is constant as pollution abatement increases.

Question 3

When property rights are clearly defined, there is generally a

Accepted Answer

A)  law that must be passed to ensure fairness. 
B)  regulatory agency that handles externalities. 
C)  common property problem. 
D)  voluntary agreement that can be reached. 
A)  law that must be passed to ensure fairness. 
B)  regulatory agency that handles externalities. 
C)  common property problem. 
D)  voluntary agreement that can be reached.

Question 4

Private property rights are

Accepted Answer

A)  an externality. 
B)  a social cost. 
C)  property that is owned by everyone and therefore by no one. 
D)  exclusive rights of ownership. 
A)  an externality. 
B)  a social cost. 
C)  property that is owned by everyone and therefore by no one. 
D)  exclusive rights of ownership.

Question 5

The total social cost of production is equal to

Accepted Answer

A)  external cost minus internal cost. 
B)  internal cost minus external cost. 
C)  external cost plus internal cost. 
D)  internal cost plus opportunity cost. 
A)  external cost minus internal cost. 
B)  internal cost minus external cost. 
C)  external cost plus internal cost. 
D)  internal cost plus opportunity cost.

Question 6

Using a graph, show the effects of a negative externality. Where is the socially optimum point of output? How can it be achieved?

Accepted Answer

@#IMG-DLM& See the above figure. E is the equilibr

Question 7

Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By doing so

Accepted Answer

A)  you have failed to bring about an efficient solution since you should have complained to the police. 
B)  you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer. 
C)  you have indicated the cost of the externality, which internalizes the externality. 
D)  you have indicated a willingness to make the external cost a social cost. 
A)  you have failed to bring about an efficient solution since you should have complained to the police. 
B)  you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer. 
C)  you have indicated the cost of the externality, which internalizes the externality. 
D)  you have indicated a willingness to make the external cost a social cost.

Question 8

A large farm uses fertilizer that nearby landowners complain may contaminate their water. Tests are conducted and contaminants are found. The costs resulting from this decision are referred to as

Accepted Answer

A)  implicit costs. 
B)  factor costs. 
C)  external costs. 
D)  opportunity costs. 
A)  implicit costs. 
B)  factor costs. 
C)  external costs. 
D)  opportunity costs.

Question 9

To find the social cost of an action, add together

Accepted Answer

A)  the external and accounting costs. 
B)  the private costs and the internal costs. 
C)  the external costs and the internal costs. 
D)  the internal costs and the private opportunity costs. 
A)  the external and accounting costs. 
B)  the private costs and the internal costs. 
C)  the external costs and the internal costs. 
D)  the internal costs and the private opportunity costs.

Question 10

The costs associated with reaching and enforcing agreements are called

Accepted Answer

A)  private property costs. 
B)  common property costs. 
C)  transaction costs. 
D)  public costs. 
A)  private property costs. 
B)  common property costs. 
C)  transaction costs. 
D)  public costs.

Question 11

Common property often results in

Accepted Answer

A)  a negative externality. 
B)  a social benefit. 
C)  more efficient production of goods. 
D)  exclusive rights of ownership. 
A)  a negative externality. 
B)  a social benefit. 
C)  more efficient production of goods. 
D)  exclusive rights of ownership.

Question 12

If the social costs of driving an automobile are greater than the private costs of driving an automobile, then

Accepted Answer

A)  the external costs of auto driving exceed the social costs of auto driving. 
B)  the external costs of auto driving exceed the internal costs. 
C)  the price of automobile driving is too high. 
D)  either people drive their autos too much or more funds should be spent on reducing air pollution. 
A)  the external costs of auto driving exceed the social costs of auto driving. 
B)  the external costs of auto driving exceed the internal costs. 
C)  the price of automobile driving is too high. 
D)  either people drive their autos too much or more funds should be spent on reducing air pollution.

Question 13

In general, we would expect the marginal cost of pollution abatement to be

Accepted Answer

A)  zero. 
B)  decreasing. 
C)  increasing. 
D)  constant. 
A)  zero. 
B)  decreasing. 
C)  increasing. 
D)  constant.

Question 14

What are social costs? How do they differ from private costs?

Accepted Answer

Social costs are costs borne by society

Question 15

Which of the following best describes the impact of the Emissions Trading Scheme in the European Union between 2005 and the late 2010s?

Accepted Answer

A)  Overall greenhouse gas emissions increased. 
B)  Overall greenhouse gas emissions decreased. 
C)  Overall greenhouse gas emissions were totally eliminated. 
D)  Overall greenhouse gas emissions were constant. 
A)  Overall greenhouse gas emissions increased. 
B)  Overall greenhouse gas emissions decreased. 
C)  Overall greenhouse gas emissions were totally eliminated. 
D)  Overall greenhouse gas emissions were constant.

Question 16

The Kyoto Protocol was signed by participating nations in

Accepted Answer

A)  2001. 
B)  1972. 
C)  1997. 
D)  2012. 
A)  2001. 
B)  1972. 
C)  1997. 
D)  2012.

Question 17

An externality is a situation in which

Accepted Answer

A)  private costs diverge from social costs. 
B)  internal costs diverge from private costs. 
C)  there are no social costs. 
D)  the cost borne by the consumer is greater than the monetary price. 
A)  private costs diverge from social costs. 
B)  internal costs diverge from private costs. 
C)  there are no social costs. 
D)  the cost borne by the consumer is greater than the monetary price.

Question 18

Economic theory suggests that if natural resources can be held as private property, then

Accepted Answer

A)  conservation will be nonexistent. 
B)  owners will have an incentive not to abuse them. 
C)  natural resources will be sold off for immediate use. 
D)  people will simply hold them and refuse to make them available. 
A)  conservation will be nonexistent. 
B)  owners will have an incentive not to abuse them. 
C)  natural resources will be sold off for immediate use. 
D)  people will simply hold them and refuse to make them available.

Question 19

Suppose cars are taxed according to the amount of pollution they emit per gallon of gasoline consumed. We would expect to observe all of the following EXCEPT

Accepted Answer

A)  an increase in quantity demanded of less-polluting automobiles and a reduction in quantity demanded of more-polluting automobiles. 
B)  an increase in quantity demanded of more fuel-efficient cars. 
C)  an increase in production of automobiles that were less polluting. 
D)  an increase in the miles driven. 
A)  an increase in quantity demanded of less-polluting automobiles and a reduction in quantity demanded of more-polluting automobiles. 
B)  an increase in quantity demanded of more fuel-efficient cars. 
C)  an increase in production of automobiles that were less polluting. 
D)  an increase in the miles driven.

Question 20

A resource that is a common property is

Accepted Answer

A)  oil on land owned by a drilling and refining company. 
B)  natural gas on land owned by an energy producer. 
C)  your neighbor's backyard. 
D)  water in a publicly owned river. 
A)  oil on land owned by a drilling and refining company. 
B)  natural gas on land owned by an energy producer. 
C)  your neighbor's backyard. 
D)  water in a publicly owned river.

Exam 31: Environmental Economics

Costs that are borne solely by the individuals who incur them are

The marginal benefit of pollution abatement

When property rights are clearly defined, there is generally a

Private property rights are

The total social cost of production is equal to

Using a graph, show the effects of a negative externality. Where is the socially optimum point of output? How can it be achieved?

Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By doing so

A large farm uses fertilizer that nearby landowners complain may contaminate their water. Tests are conducted and contaminants are found. The costs resulting from this decision are referred to as

To find the social cost of an action, add together

The costs associated with reaching and enforcing agreements are called

Common property often results in

If the social costs of driving an automobile are greater than the private costs of driving an automobile, then

In general, we would expect the marginal cost of pollution abatement to be

What are social costs? How do they differ from private costs?

Which of the following best describes the impact of the Emissions Trading Scheme in the European Union between 2005 and the late 2010s?

The Kyoto Protocol was signed by participating nations in

An externality is a situation in which

Economic theory suggests that if natural resources can be held as private property, then

Suppose cars are taxed according to the amount of pollution they emit per gallon of gasoline consumed. We would expect to observe all of the following EXCEPT

A resource that is a common property 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

Filters