Question 1

-In the above figure, the optimal level of pollution cleanup is

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Question 2

What are the private costs of driving an automobile? What are the external costs?

Accepted Answer

The private costs include gas, maintenan

Question 3

The problem associated with endangered populations of migratory birds is the

Accepted Answer

A)  common property problem. 
B)  free rider problem. 
C)  deadweight loss problem. 
D)  inefficient production problem. 
A)  common property problem. 
B)  free rider problem. 
C)  deadweight loss problem. 
D)  inefficient production problem.

Question 4

In principle, a cap-and-trade program would

Accepted Answer

A)  cause firms to generate more pollution than their allowed limits. 
B)  cause firms to generate less pollution than their allowed limits. 
C)  raise the production costs of all firms. 
D)  lower the production costs of all firms. 
A)  cause firms to generate more pollution than their allowed limits. 
B)  cause firms to generate less pollution than their allowed limits. 
C)  raise the production costs of all firms. 
D)  lower the production costs of all firms.

Question 5

The social costs of an activity are greater than the private costs of the activity when

Accepted Answer

A)  a person does not pay all costs associated with a particular resource-using activity. 
B)  the internal costs of the resource-using activity are less than the external costs of the activity. 
C)  the internal costs of the resource-using activity are positive. 
D)  the external costs of the resource-using activity are zero. 
A)  a person does not pay all costs associated with a particular resource-using activity. 
B)  the internal costs of the resource-using activity are less than the external costs of the activity. 
C)  the internal costs of the resource-using activity are positive. 
D)  the external costs of the resource-using activity are zero.

Question 6

Why are externalities associated with common property rather than private property?

Accepted Answer

When private property rights exist, indi

Question 7

In general, pollution exists if

Accepted Answer

A)  people are unconcerned about the hazards associated with pollution. 
B)  there are poorly defined private property rights. 
C)  there are poorly defined common property rights. 
D)  profit-making activity is taken to an extreme. 
A)  people are unconcerned about the hazards associated with pollution. 
B)  there are poorly defined private property rights. 
C)  there are poorly defined common property rights. 
D)  profit-making activity is taken to an extreme.

Question 8

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

Accepted Answer

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

Question 9

A good that has social costs that exceed private costs has a quantity that is

Accepted Answer

A)  too high. 
B)  too low. 
C)  just right. 
D)  the best society can do. 
A)  too high. 
B)  too low. 
C)  just right. 
D)  the best society can do.

Question 10

The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen

Accepted Answer

A)  will not be able to fish. 
B)  can trade their rights (shares) to fish or not. 
C)  will externalize their private costs to the government. 
D)  will lower their private costs to fish. 
A)  will not be able to fish. 
B)  can trade their rights (shares) to fish or not. 
C)  will externalize their private costs to the government. 
D)  will lower their private costs to fish.

Question 11

In general, pollution exists in situations in which

Accepted Answer

A)  people are selfish. 
B)  people refuse to take social responsibility seriously. 
C)  there are poorly defined private property rights. 
D)  there exists public property. 
A)  people are selfish. 
B)  people refuse to take social responsibility seriously. 
C)  there are poorly defined private property rights. 
D)  there exists public property.

Question 12

When no property rights exist

Accepted Answer

A)  no one has an economic incentive to care for common property, and an externality may well occur. 
B)  there will be no production. 
C)  externalities will be internalized by voluntary arrangements among a small group of parties. 
D)  society will produce beyond the production possibilities frontier, but the allocation of resources is not apt to be optimal. 
A)  no one has an economic incentive to care for common property, and an externality may well occur. 
B)  there will be no production. 
C)  externalities will be internalized by voluntary arrangements among a small group of parties. 
D)  society will produce beyond the production possibilities frontier, but the allocation of resources is not apt to be optimal.

Question 13

When social costs of an activity exceed private costs

Accepted Answer

A)  a market failure exists. 
B)  there is a tendency for resources to be under-utilized. 
C)  this means that resources are being efficiently used. 
D)  the actual price is above the efficient price. 
A)  a market failure exists. 
B)  there is a tendency for resources to be under-utilized. 
C)  this means that resources are being efficiently used. 
D)  the actual price is above the efficient price.

Question 14

The Endangered Species Act has

Accepted Answer

A)  caused a loss of economic activities on some private land. 
B)  saved all endangered species without affecting anyone. 
C)  further reduced the number of endangered species. 
D)  had no impact on either the number of endangered species or other economic activities. 
A)  caused a loss of economic activities on some private land. 
B)  saved all endangered species without affecting anyone. 
C)  further reduced the number of endangered species. 
D)  had no impact on either the number of endangered species or other economic activities.

Question 15

The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant B) Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government should

Accepted Answer

A)  levy the same tax per unit of pollution on both plants. 
B)  levy a higher tax per unit of pollution on Plant A because of its higher economic damage. 
C)  levy a higher tax per unit of pollution on Plant B because of its lower economic damage. 
D)  tax only Plant A but not Plant B because Plant B generates less revenue. 
A)  levy the same tax per unit of pollution on both plants. 
B)  levy a higher tax per unit of pollution on Plant A because of its higher economic damage. 
C)  levy a higher tax per unit of pollution on Plant B because of its lower economic damage. 
D)  tax only Plant A but not Plant B because Plant B generates less revenue.

Question 16

Social costs are

Accepted Answer

A)  private costs plus any external costs. 
B)  the costs of the externality only. 
C)  costs incurred when common property is used. 
D)  the costs associated with reaching and enforcing agreements. 
A)  private costs plus any external costs. 
B)  the costs of the externality only. 
C)  costs incurred when common property is used. 
D)  the costs associated with reaching and enforcing agreements.

Question 17

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

Accepted Answer

A)  the administrative costs are high. 
B)  the cost of ascertaining the actual economic costs are relatively small. 
C)  the economic damages are zero. 
D)  the economic damages associated with the pollution are different across different locations. 
A)  the administrative costs are high. 
B)  the cost of ascertaining the actual economic costs are relatively small. 
C)  the economic damages are zero. 
D)  the economic damages associated with the pollution are different across different locations.

Question 18

Social costs is equal to the sum of

Accepted Answer

A)  internal and private costs. 
B)  internal and external costs. 
C)  internal and implicit costs. 
D)  internal and production costs. 
A)  internal and private costs. 
B)  internal and external costs. 
C)  internal and implicit costs. 
D)  internal and production costs.

Question 19

-In the above figure, if a firm is cleaning up Q4 units of pollution, it is an

Accepted Answer

A)  efficient solution, because marginal social benefits are greater than marginal social costs. 
B)  efficient solution, because marginal social benefits are equal to marginal social costs. 
C)  inefficient solution, because marginal social benefits are greater than marginal social costs. 
D)  inefficient solution, because marginal social costs are greater than marginal social benefits. 
A)  efficient solution, because marginal social benefits are greater than marginal social costs. 
B)  efficient solution, because marginal social benefits are equal to marginal social costs. 
C)  inefficient solution, because marginal social benefits are greater than marginal social costs. 
D)  inefficient solution, because marginal social costs are greater than marginal social benefits.

Question 20

Another name for internal cost is

Accepted Answer

A)  private cost. 
B)  social cost. 
C)  psychological cost. 
D)  marginal cost. 
A)  private cost. 
B)  social cost. 
C)  psychological cost. 
D)  marginal cost.

Exam 31: Environmental Economics

-In the above figure, the optimal level of pollution cleanup is

What are the private costs of driving an automobile? What are the external costs?

The problem associated with endangered populations of migratory birds is the

In principle, a cap-and-trade program would

The social costs of an activity are greater than the private costs of the activity when

Why are externalities associated with common property rather than private property?

In general, pollution exists if

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

A good that has social costs that exceed private costs has a quantity that is

The problem of overfishing in waters that are commonly owned can be solved when the government determines the total amount of fish can be removed from a given area during each fishing season. Then the fishermen

In general, pollution exists in situations in which

When no property rights exist

When social costs of an activity exceed private costs

The Endangered Species Act has

The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant B) Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government should

Social costs are

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

Social costs is equal to the sum of

-In the above figure, if a firm is cleaning up Q4 units of pollution, it is an

Another name for internal cost 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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