Question 1

Which of the following is NOT a possible solution to the problem of pollution?

Accepted Answer

A)  subsidizing the costs of production of activities that generate pollution 
B)  converting a resource that is communally owned into a privately owned resource 
C)  regulating the quantity of pollution that can be generated 
D)  imposing a pollution tax on producers 
A)  subsidizing the costs of production of activities that generate pollution 
B)  converting a resource that is communally owned into a privately owned resource 
C)  regulating the quantity of pollution that can be generated 
D)  imposing a pollution tax on producers

Question 2

The inclusion of external costs in the decision making process determining equilibrium price and quantity leads to

Accepted Answer

A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity. 
A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity.

Question 3

There is an externality present only when

Accepted Answer

A)  private costs equal social benefits. 
B)  private benefits equal social benefits. 
C)  private costs or benefits diverge from social costs or benefits. 
D)  private costs equal social costs. 
A)  private costs equal social benefits. 
B)  private benefits equal social benefits. 
C)  private costs or benefits diverge from social costs or benefits. 
D)  private costs equal social costs.

Question 4

Which of the following is TRUE about species in the world?

Accepted Answer

A)  Most extinct species became extinct within the past 30 years. 
B)  The majority of extinct species became extinct before humans appeared. 
C)  Extinct species became extinct only after human appeared. 
D)  No species has ever become extinct. 
A)  Most extinct species became extinct within the past 30 years. 
B)  The majority of extinct species became extinct before humans appeared. 
C)  Extinct species became extinct only after human appeared. 
D)  No species has ever become extinct.

Question 5

Which of the following is most likely to be common property?

Accepted Answer

A)  lawn in a privately owned golf club 
B)  farm raised catfish in Alabama 
C)  tuna in the Pacific Ocean 
D)  cattle in a Texas ranch 
A)  lawn in a privately owned golf club 
B)  farm raised catfish in Alabama 
C)  tuna in the Pacific Ocean 
D)  cattle in a Texas ranch

Question 6

The marginal cost curve of a firm measures

Accepted Answer

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

Question 7

Which of the following methods could be used to correct for external costs?

Accepted Answer

A)  Impose a tax or an effluent fee on the offenders. 
B)  Have the offender clean up the pollution it caused. 
C)  Require firms in the industry to install pollution control devices. 
D)  All of the above would be appropriate. 
A)  Impose a tax or an effluent fee on the offenders. 
B)  Have the offender clean up the pollution it caused. 
C)  Require firms in the industry to install pollution control devices. 
D)  All of the above would be appropriate.

Question 8

If pollution is bad, why do we still use pollution-causing resources such as coal and oil to generate electricity?

Accepted Answer

A)  Governments lack the political will to enforce the use of pollution free resources. 
B)  The cost of using pollution free resources to generate power in many circumstances is much higher than generating that same power through conventional pollution-causing means. 
C)  Pollution is only a private cost. 
D)  The transaction costs of pollution is too low. 
A)  Governments lack the political will to enforce the use of pollution free resources. 
B)  The cost of using pollution free resources to generate power in many circumstances is much higher than generating that same power through conventional pollution-causing means. 
C)  Pollution is only a private cost. 
D)  The transaction costs of pollution is too low.

Question 9

Society must pay the full opportunity cost of any activity

Accepted Answer

A)  that uses scarce resources. 
B)  that causes costs to rise. 
C)  that increases revenues. 
D)  none of the above. 
A)  that uses scarce resources. 
B)  that causes costs to rise. 
C)  that increases revenues. 
D)  none of the above.

Question 10

The underlying reason of the problem of pollution is

Accepted Answer

A)  a poorly run Environmental Protection Agency. 
B)  greed on the part of consumers. 
C)  greed on the part of producers. 
D)  poorly defined property rights that are expensive to enforce. 
A)  a poorly run Environmental Protection Agency. 
B)  greed on the part of consumers. 
C)  greed on the part of producers. 
D)  poorly defined property rights that are expensive to enforce.

Question 11

According to economic analysis, the optimal level of pollution is

Accepted Answer

A)  always zero. 
B)  at the point at which the marginal benefits of pollution control exceed the marginal cost. 
C)  at the point at which the marginal benefits of pollution control are less than the marginal cost. 
D)  at the point at which the marginal benefits from pollution control are equal to the marginal cost. 
A)  always zero. 
B)  at the point at which the marginal benefits of pollution control exceed the marginal cost. 
C)  at the point at which the marginal benefits of pollution control are less than the marginal cost. 
D)  at the point at which the marginal benefits from pollution control are equal to the marginal cost.

Question 12

Wild animals are likely to be

Accepted Answer

A)  private property. 
B)  endangered species. 
C)  externalities. 
D)  all of the above. 
A)  private property. 
B)  endangered species. 
C)  externalities. 
D)  all of the above.

Question 13

Which of the following was signed in the Kyoto Protocol?

Accepted Answer

A)  the Framework Convention on Climate Change 
B)  the Zero Greenhouse Gas Agreement 
C)  the Treaty on Global Warming 
D)  the Emission Trading Scheme 
A)  the Framework Convention on Climate Change 
B)  the Zero Greenhouse Gas Agreement 
C)  the Treaty on Global Warming 
D)  the Emission Trading Scheme

Question 14

An externality exists when

Accepted Answer

A)  there are private costs. 
B)  there are internal costs. 
C)  there are external costs. 
D)  there are opportunity costs. 
A)  there are private costs. 
B)  there are internal costs. 
C)  there are external costs. 
D)  there are opportunity costs.

Question 15

A difficulty with using a uniform per-unit tax to address a negative externality is that

Accepted Answer

A)  the tax will reduce output. 
B)  the tax will increase price. 
C)  the social cost of pollution might vary across geographic regions. 
D)  the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms. 
A)  the tax will reduce output. 
B)  the tax will increase price. 
C)  the social cost of pollution might vary across geographic regions. 
D)  the social cost of pollution should not be assessed on the consumers, but should be assessed on the firms.

Question 16

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is TRUE?

Accepted Answer

A)  Voluntary agreements usually do not work since the owner has no incentive to negotiate. 
B)  Transactions costs must be low relative to the expected benefits of reaching an agreement. 
C)  Voluntary agreements are difficult to negotiate because they usually involve government intervention. 
D)  Voluntary agreements always leave the owner worse off. 
A)  Voluntary agreements usually do not work since the owner has no incentive to negotiate. 
B)  Transactions costs must be low relative to the expected benefits of reaching an agreement. 
C)  Voluntary agreements are difficult to negotiate because they usually involve government intervention. 
D)  Voluntary agreements always leave the owner worse off.

Question 17

-Use the above table. What will the tax be when external costs are internalized?

Accepted Answer

A)  $14 
B)  $13 
C)  $12.20 
D)  $1.80 
A)  $14 
B)  $13 
C)  $12.20 
D)  $1.80

Question 18

The exclusive rights of ownership of property are generally referred to as

Accepted Answer

A)  level property rights. 
B)  private property rights. 
C)  public property rights. 
D)  common property rights. 
A)  level property rights. 
B)  private property rights. 
C)  public property rights. 
D)  common property rights.

Question 19

The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to

Accepted Answer

A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity. 
A)  lower priced items and increased quantity. 
B)  lower priced items and a decline in quantity. 
C)  higher priced items and increased quantity. 
D)  higher priced items and a decline in quantity.

Question 20

In a market for emission permits, firms that emit below their allowed limits

Accepted Answer

A)  will buy even more allowances through a trading system. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  will sell their excess allowances through a trading system. 
A)  will buy even more allowances through a trading system. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  will sell their excess allowances through a trading system.

Exam 31: Environmental Economics

Which of the following is NOT a possible solution to the problem of pollution?

The inclusion of external costs in the decision making process determining equilibrium price and quantity leads to

There is an externality present only when

Which of the following is TRUE about species in the world?

Which of the following is most likely to be common property?

The marginal cost curve of a firm measures

Which of the following methods could be used to correct for external costs?

If pollution is bad, why do we still use pollution-causing resources such as coal and oil to generate electricity?

Society must pay the full opportunity cost of any activity

The underlying reason of the problem of pollution is

According to economic analysis, the optimal level of pollution is

Wild animals are likely to be

Which of the following was signed in the Kyoto Protocol?

An externality exists when

A difficulty with using a uniform per-unit tax to address a negative externality is that

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is TRUE?

-Use the above table. What will the tax be when external costs are internalized?

The exclusive rights of ownership of property are generally referred to as

The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to

In a market for emission permits, firms that emit below their allowed limits

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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