Question 1

Attaining higher and higher levels of air cleanliness causes

Accepted Answer

A)  additional costs to rise to increasingly high levels. 
B)  larger and larger increases in per capita incomes. 
C)  additional costs to fall to lower and lower levels. 
D)  larger and larger marginal benefits to society. 
A)  additional costs to rise to increasingly high levels. 
B)  larger and larger increases in per capita incomes. 
C)  additional costs to fall to lower and lower levels. 
D)  larger and larger marginal benefits to society.

Question 2

Pollution

Accepted Answer

A)  creates a negative externality. 
B)  is increased when property rights are defined. 
C)  is absent in a free market economy. 
D)  exists because air and water are privately owned resources. 
A)  creates a negative externality. 
B)  is increased when property rights are defined. 
C)  is absent in a free market economy. 
D)  exists because air and water are privately owned resources.

Question 3

The Endangered Species Act is an attempt to

Accepted Answer

A)  protect endangered species against greedy loggers, farmers, and business people. 
B)  protect endangered species from the overzealousness of many environmentalists. 
C)  protect species endangered because there are no private property rights on them. 
D)  prevent some people from earning a good living. 
A)  protect endangered species against greedy loggers, farmers, and business people. 
B)  protect endangered species from the overzealousness of many environmentalists. 
C)  protect species endangered because there are no private property rights on them. 
D)  prevent some people from earning a good living.

Question 4

-Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the supply curve that includes social costs. From this figure we know that

Accepted Answer

A)  an external benefit exists. 
B)  private costs are less than social costs. 
C)  private costs equal social costs. 
D)  private costs are greater than social costs. 
A)  an external benefit exists. 
B)  private costs are less than social costs. 
C)  private costs equal social costs. 
D)  private costs are greater than social costs.

Question 5

In economic analysis, the optimal level of pollution

Accepted Answer

A)  is always zero. 
B)  arises at the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. 
C)  occurs at the point at which demand crosses the private cost supply curve. 
D)  should be determined by the private market without any government intervention. 
A)  is always zero. 
B)  arises at the point at which the marginal benefit from further reduction equals the marginal cost of further reduction. 
C)  occurs at the point at which demand crosses the private cost supply curve. 
D)  should be determined by the private market without any government intervention.

Question 6

An externality

Accepted Answer

A)  may be positive or negative. 
B)  means a rapidly rising cost borne by consumers. 
C)  is the cost of producing a good outside the United States. 
D)  is the indirect cost, the overhead, of producing a product. 
A)  may be positive or negative. 
B)  means a rapidly rising cost borne by consumers. 
C)  is the cost of producing a good outside the United States. 
D)  is the indirect cost, the overhead, of producing a product.

Question 7

-In the above table, the optimal quantity of clean air is

Accepted Answer

A)  25 percent. 
B)  50 percent. 
C)  75 percent. 
D)  100 percent. 
A)  25 percent. 
B)  50 percent. 
C)  75 percent. 
D)  100 percent.

Question 8

The marginal benefit of pollution abatement is graphically illustrated by

Accepted Answer

A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal curve. 
D)  a vertical curve. 
A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal curve. 
D)  a vertical curve.

Question 9

Common property

Accepted Answer

A)  is owned by everyone. 
B)  is owned by no one. 
C)  Neither A nor B are correct. 
D)  Both A and B are correct. 
A)  is owned by everyone. 
B)  is owned by no one. 
C)  Neither A nor B are correct. 
D)  Both A and B are correct.

Question 10

Air pollution is a problem because

Accepted Answer

A)  people are greedy. 
B)  people are not environmentally conscious. 
C)  people make use of air without having to bear all the costs of their actions. 
D)  a market economy does not provide as strong an incentive for environmental cleanup as a socialist economy. 
A)  people are greedy. 
B)  people are not environmentally conscious. 
C)  people make use of air without having to bear all the costs of their actions. 
D)  a market economy does not provide as strong an incentive for environmental cleanup as a socialist economy.

Question 11

Exclusive rights of ownership that allow the use, transfer, and exchange of property are called

Accepted Answer

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

Question 12

Changing the ownership of the ocean from common property to private property would

Accepted Answer

A)  ensure that this resource would be allocated in a more efficient manner. 
B)  ensure that this resource would be allocated in a less efficient manner than under common property rights. 
C)  not be economically desirable. 
D)  result in no appreciable change in efficiency of utilization of this resource. 
A)  ensure that this resource would be allocated in a more efficient manner. 
B)  ensure that this resource would be allocated in a less efficient manner than under common property rights. 
C)  not be economically desirable. 
D)  result in no appreciable change in efficiency of utilization of this resource.

Question 13

The total costs of using a resource are made up of

Accepted Answer

A)  private costs only. 
B)  external costs only. 
C)  social costs only. 
D)  internal and private costs only. 
A)  private costs only. 
B)  external costs only. 
C)  social costs only. 
D)  internal and private costs only.

Question 14

Which of the following might be a way that an automobile driver's pollution costs could be internalized?

Accepted Answer

A)  The driver could purchase abatement equipment for her car. 
B)  The state could eliminate the gas tax. 
C)  The state could pay a gas subsidy for everyone who drives. 
D)  The state could allow her to drive in the HOV lane. 
A)  The driver could purchase abatement equipment for her car. 
B)  The state could eliminate the gas tax. 
C)  The state could pay a gas subsidy for everyone who drives. 
D)  The state could allow her to drive in the HOV lane.

Question 15

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

Accepted Answer

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

Question 16

-Refer to the above figure. It represents supply and demand for The Black Ash Steel Company's output. The firm's plant belches large quantities of smelly fumes and black ash into the air. Residents in the surrounding area have higher medical bills as a result. If the firm is forced to pay the full social cost of its production, what will occur?

Accepted Answer

A)  Black Ash's supply curve will shift from SA to SB. 
B)  Demand for the firm's steel will shift to the left. 
C)  The company's supply curve will shift from SB to SA. 
D)  Black Ash will increase its own output to cover the cost increase. 
A)  Black Ash's supply curve will shift from SA to SB. 
B)  Demand for the firm's steel will shift to the left. 
C)  The company's supply curve will shift from SB to SA. 
D)  Black Ash will increase its own output to cover the cost increase.

Question 17

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Suppose the equilibrium is for a factory in Los Angeles. What would happen if the same factory were in the middle of Nevada?

Accepted Answer

A)  The marginal cost curve (1) would shift to (2) and there would be no difference in the level of abatement. 
B)  The marginal cost curve (2) would shift to the left and there would be less abatement in Nevada. 
C)  The marginal benefit curve (4) would shift to the left and there would be less abatement in Nevada. 
D)  The marginal benefit curve (2) would shift to the right and there would be more abatement in Nevada. 
A)  The marginal cost curve (1) would shift to (2) and there would be no difference in the level of abatement. 
B)  The marginal cost curve (2) would shift to the left and there would be less abatement in Nevada. 
C)  The marginal benefit curve (4) would shift to the left and there would be less abatement in Nevada. 
D)  The marginal benefit curve (2) would shift to the right and there would be more abatement in Nevada.

Question 18

As society approaches total pollution abatement

Accepted Answer

A)  the marginal benefit to society declines. 
B)  the marginal benefit to society increases. 
C)  the marginal benefit to society increases, but at a decreasing rate. 
D)  the marginal cost to society declines. 
A)  the marginal benefit to society declines. 
B)  the marginal benefit to society increases. 
C)  the marginal benefit to society increases, but at a decreasing rate. 
D)  the marginal cost to society declines.

Question 19

According to economic analysis, the optimal quantity of pollution exists at the point at which the

Accepted Answer

A)  total benefit of pollution control is equal to the total cost. 
B)  marginal benefit of pollution control is equal to the marginal cost. 
C)  level of pollution is at zero. 
D)  level of pollution is acceptable to the society. 
A)  total benefit of pollution control is equal to the total cost. 
B)  marginal benefit of pollution control is equal to the marginal cost. 
C)  level of pollution is at zero. 
D)  level of pollution is acceptable to the society.

Question 20

Steve raises bees to pollinate his orange trees. One of the bees just stung him. This is a(n)

Accepted Answer

A)  private cost. 
B)  social cost. 
C)  opportunity cost. 
D)  common property. 
A)  private cost. 
B)  social cost. 
C)  opportunity cost. 
D)  common property.

Exam 31: Environmental Economics

Attaining higher and higher levels of air cleanliness causes

Pollution

The Endangered Species Act is an attempt to

-Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the supply curve that includes social costs. From this figure we know that

In economic analysis, the optimal level of pollution

An externality

-In the above table, the optimal quantity of clean air is

The marginal benefit of pollution abatement is graphically illustrated by

Common property

Air pollution is a problem because

Exclusive rights of ownership that allow the use, transfer, and exchange of property are called

Changing the ownership of the ocean from common property to private property would

The total costs of using a resource are made up of

Which of the following might be a way that an automobile driver's pollution costs could be internalized?

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

-Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Suppose the equilibrium is for a factory in Los Angeles. What would happen if the same factory were in the middle of Nevada?

As society approaches total pollution abatement

According to economic analysis, the optimal quantity of pollution exists at the point at which the

Steve raises bees to pollinate his orange trees. One of the bees just stung him. This is a(n)

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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