Question 1

If a person does NOT pay all costs associated with a particular resource-using activity, then

Accepted Answer

A)  the external costs of the activity are greater than the private costs of the activity. 
B)  the social costs of the activity are greater than the private costs of the activity. 
C)  the external costs of the activity are greater than the internal costs of the activity. 
D)  the full costs of the activity are the sum of private costs plus internal costs. 
A)  the external costs of the activity are greater than the private costs of the activity. 
B)  the social costs of the activity are greater than the private costs of the activity. 
C)  the external costs of the activity are greater than the internal costs of the activity. 
D)  the full costs of the activity are the sum of private costs plus internal costs.

Question 2

Joe has broken the mirror of my car. I have legal recourse to sue for damages because of

Accepted Answer

A)  social costs. 
B)  transactions costs. 
C)  common property rights. 
D)  private property rights. 
A)  social costs. 
B)  transactions costs. 
C)  common property rights. 
D)  private property rights.

Question 3

By 2006, the market price of European Union emissions allowances dropped because

Accepted Answer

A)  governments set their overall emission caps too high. 
B)  firms had drastically reduced their emissions. 
C)  firms underreport their emission amounts. 
D)  the market did not clear. 
A)  governments set their overall emission caps too high. 
B)  firms had drastically reduced their emissions. 
C)  firms underreport their emission amounts. 
D)  the market did not clear.

Question 4

"The number of species on earth is decreasing drastically and economic development is the main factor for the problem." Do you agree or disagree? Why?

Accepted Answer

Disagree. First, it is unclear that the

Question 5

If pollutants from smoke stacks in a city such as Newark causes people to paint their homes and cars more frequently, this implies

Accepted Answer

A)  external benefits to the home and car owners. 
B)  external costs on home and car owners. 
C)  internal cost to home and car owners. 
D)  none of the above. 
A)  external benefits to the home and car owners. 
B)  external costs on home and car owners. 
C)  internal cost to home and car owners. 
D)  none of the above.

Question 6

-The optimal quantity of pollution in the above figure

Accepted Answer

A)  is defined as the level where the marginal benefit is at a maximum. 
B)  is where the optimal degree of air cleanliness is 100 percent. 
C)  is the level of pollution at which the marginal benefit equals the marginal cost. 
D)  cannot be determined. 
A)  is defined as the level where the marginal benefit is at a maximum. 
B)  is where the optimal degree of air cleanliness is 100 percent. 
C)  is the level of pollution at which the marginal benefit equals the marginal cost. 
D)  cannot be determined.

Question 7

An individual who pays for a vehicle has incurred a

Accepted Answer

A)  social cost. 
B)  private cost. 
C)  negative externality. 
D)  positive externality. 
A)  social cost. 
B)  private cost. 
C)  negative externality. 
D)  positive externality.

Question 8

Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases emission through 2020 to

Accepted Answer

A)  as much as 20 percent below the levels in the 1990s. 
B)  as much as 5 percent below the levels in the 1990s. 
C)  as much as 50 percent below the levels in the 1970s. 
D)  as much as 80 percent below the levels in the 1960s. 
A)  as much as 20 percent below the levels in the 1990s. 
B)  as much as 5 percent below the levels in the 1990s. 
C)  as much as 50 percent below the levels in the 1970s. 
D)  as much as 80 percent below the levels in the 1960s.

Question 9

A good that has social costs that are equal to private costs has a price that is

Accepted Answer

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

Question 10

In order for a voluntary agreement to be reached in general, transaction costs should be

Accepted Answer

A)  infinite. 
B)  high relative to expected marginal benefits of the agreement. 
C)  low relative to expected marginal benefits of the agreement. 
D)  determined by the Environmental Protection Agency. 
A)  infinite. 
B)  high relative to expected marginal benefits of the agreement. 
C)  low relative to expected marginal benefits of the agreement. 
D)  determined by the Environmental Protection Agency.

Question 11

To correct for the social impact of pollution, the government should levy a per-unit tax

Accepted Answer

A)  that is the same for all polluters regardless of their locations or sizes. 
B)  according to the economic damage of the pollution. 
C)  according to the business activity of the polluter. 
D)  only to those polluters that can afford to pay for the tax. 
A)  that is the same for all polluters regardless of their locations or sizes. 
B)  according to the economic damage of the pollution. 
C)  according to the business activity of the polluter. 
D)  only to those polluters that can afford to pay for the tax.

Question 12

All of the costs associated with making and enforcing contracts are referred to as

Accepted Answer

A)  alternative costs. 
B)  opportunity costs. 
C)  marginal costs. 
D)  transactions costs. 
A)  alternative costs. 
B)  opportunity costs. 
C)  marginal costs. 
D)  transactions costs.

Question 13

Common property ownership most likely leads to

Accepted Answer

A)  an efficient allocation of resources. 
B)  production at a rate at which price is less than social cost. 
C)  more social justice. 
D)  an increase of externalities. 
A)  an efficient allocation of resources. 
B)  production at a rate at which price is less than social cost. 
C)  more social justice. 
D)  an increase of externalities.

Question 14

Suppose a large tree on Jack's property blocks Amy's view of the ocean. Jack accepts Amy's offer of $2,000 to cut down the tree. This is an example of

Accepted Answer

A)  internalizing externalities via voluntary agreements. 
B)  a result of logrolling. 
C)  a consequence of a positive externality. 
D)  a consequence of private costs exceeding social costs. 
A)  internalizing externalities via voluntary agreements. 
B)  a result of logrolling. 
C)  a consequence of a positive externality. 
D)  a consequence of private costs exceeding social costs.

Question 15

When the private costs and the social costs are NOT the same, there is a(n)

Accepted Answer

A)  externality. 
B)  internality. 
C)  public good. 
D)  monopoly. 
A)  externality. 
B)  internality. 
C)  public good. 
D)  monopoly.

Question 16

Which of the following is the main reason for externalities?

Accepted Answer

A)  The full cost of a transaction is not borne by the buyer/seller of the product. 
B)  Police enforcement of scalping is not uniformly enforced. 
C)  the lack of organized exchanges for all goods and services 
D)  The production of public goods uses up scarce resources. 
A)  The full cost of a transaction is not borne by the buyer/seller of the product. 
B)  Police enforcement of scalping is not uniformly enforced. 
C)  the lack of organized exchanges for all goods and services 
D)  The production of public goods uses up scarce resources.

Question 17

It is assumed that the marginal benefit of air cleanliness falls with the degree of cleanliness since

Accepted Answer

A)  the marginal cost of air cleanliness increases. 
B)  air cleanliness is a public good and not a private good. 
C)  the marginal utility of air cleanliness falls with the degree of cleanliness. 
D)  the generation of pollution should be considered an externality. 
A)  the marginal cost of air cleanliness increases. 
B)  air cleanliness is a public good and not a private good. 
C)  the marginal utility of air cleanliness falls with the degree of cleanliness. 
D)  the generation of pollution should be considered an externality.

Question 18

Which of the following statements concerning pollution is correct?

Accepted Answer

A)  Economic efficiency requires that pollution be completely eliminated. 
B)  Economic efficiency dictates that the optimal amount of pollution arises at the point at which price equals private marginal cost. 
C)  Pollution should be reduced to the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. 
D)  Pollution should be reduced to the extent necessary to return production to the production possibilities frontier. 
A)  Economic efficiency requires that pollution be completely eliminated. 
B)  Economic efficiency dictates that the optimal amount of pollution arises at the point at which price equals private marginal cost. 
C)  Pollution should be reduced to the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. 
D)  Pollution should be reduced to the extent necessary to return production to the production possibilities frontier.

Question 19

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

Accepted Answer

A)  are forced to shut down. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  pay a price of these emissions. 
A)  are forced to shut down. 
B)  are taxed by the government for the amount of emissions. 
C)  receive a subsidy for the amount of emissions. 
D)  pay a price of these emissions.

Question 20

Suppose there are two firms on a river and the production processes of both require clean water. The upstream firm's process dirties the water, which it dumps back into the river. The downstream firm must clean the water before using it in its production process. If the two firms would merge

Accepted Answer

A)  the external costs of the merged firm would equal the external costs of the upstream firm, which would then be passed on to its customers. 
B)  the total costs of production fall since the external costs disappear. 
C)  the external costs of the upstream firm are private costs after the merger. 
D)  the internal costs of the downstream firm become external costs of the merged firm. 
A)  the external costs of the merged firm would equal the external costs of the upstream firm, which would then be passed on to its customers. 
B)  the total costs of production fall since the external costs disappear. 
C)  the external costs of the upstream firm are private costs after the merger. 
D)  the internal costs of the downstream firm become external costs of the merged firm.

Exam 31: Environmental Economics

If a person does NOT pay all costs associated with a particular resource-using activity, then

Joe has broken the mirror of my car. I have legal recourse to sue for damages because of

By 2006, the market price of European Union emissions allowances dropped because

"The number of species on earth is decreasing drastically and economic development is the main factor for the problem." Do you agree or disagree? Why?

If pollutants from smoke stacks in a city such as Newark causes people to paint their homes and cars more frequently, this implies

-The optimal quantity of pollution in the above figure

An individual who pays for a vehicle has incurred a

Participating nations in the 1997 Kyoto Protocol agreed to reduce overall greenhouse gases emission through 2020 to

A good that has social costs that are equal to private costs has a price that is

In order for a voluntary agreement to be reached in general, transaction costs should be

To correct for the social impact of pollution, the government should levy a per-unit tax

All of the costs associated with making and enforcing contracts are referred to as

Common property ownership most likely leads to

Suppose a large tree on Jack's property blocks Amy's view of the ocean. Jack accepts Amy's offer of $2,000 to cut down the tree. This is an example of

When the private costs and the social costs are NOT the same, there is a(n)

Which of the following is the main reason for externalities?

It is assumed that the marginal benefit of air cleanliness falls with the degree of cleanliness since

Which of the following statements concerning pollution is correct?

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

Suppose there are two firms on a river and the production processes of both require clean water. The upstream firm's process dirties the water, which it dumps back into the river. The downstream firm must clean the water before using it in its production process. If the two firms would merge

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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