Question 1

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)  timber on land owned by a lumber company. 
D)  water in a publicly owned river.

Question 2

When no one owns a particular resource,

Accepted Answer

A)  property rights are clearly defined. 
B)  individuals have legal recourse for any damages caused to their resource. 
C)  no one has any incentive to consider externality spillovers associated with that resource. 
D)  positive externalities will arise.

Question 3

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.

Question 4

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.

Question 5

A good that has social costs that are less than private costs has a quantity that is

Accepted Answer

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

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.

Question 7

Common property is

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.

Question 8

As we approach 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.

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.

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.

Question 11

A farmer notices that a neighboring rancher's cattle are wandering and destroying some of his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd. By doing so, the farmer

Accepted Answer

A)  can be sure that the size of the herd will be reduced and the size of his own harvest will be increased. 
B)  indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and thereby internalizes the externality. 
C)  inadvertently bears the costs of the externality when the rancher should be liable for the costs. 
D)  informs the rancher that the cattle have destroyed crops, which should induce the farmer to build a fence in order to maintain good relations.

Question 12

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

The answer of Using a graph, show the effects of...

Question 13

Externalities exist because

Accepted Answer

A)  private costs differ from social costs. 
B)  private costs are equal to social costs. 
C)  government has created them. 
D)  they are a function of socialism.

Question 14

Wild animals are likely to be

Accepted Answer

A)  private property. 
B)  endangered species. 
C)  domesticated by humans. 
D)  all of the above.

Question 15

The costs associated with the negotiation and enforcement of an agreement are

Accepted Answer

A)  property costs. 
B)  resource factor costs. 
C)  transaction costs. 
D)  attorney fees.

Question 16

Why don't people take into consideration the external costs of their actions and reduce the amount of externalities?

Accepted Answer

The answer of Why don't people take into consideration the...

Question 17

The Black Ash Steel Company's plant belches large quantities of noxious fumes and black ash into the air. Residents in the surrounding area have higher medical bills because of Black Ash's pollution. These additional medical costs represent

Accepted Answer

A)  a positive externality. 
B)  a negative externality. 
C)  the company's private costs. 
D)  the neighboring families' external costs.

Question 18

Endangered species are likely to be

Accepted Answer

A)  private property. 
B)  common property. 
C)  both private and common property. 
D)  neither private nor common property.

Question 19

When social costs of an activity exceed private costs

Accepted Answer

A)  there is a tendency for resources to be under-utilized. 
B)  this means that resources are being efficiently used. 
C)  there is a tendency for resources to be over-utilized. 
D)  None of the above is correct.

Question 20

All of the following are examples of goods for which external costs commonly exist EXCEPT

Accepted Answer

A)  cigarettes. 
B)  automobiles. 
C)  vaccinations. 
D)  oil transportation.

Exam 31: Environmental Economics