Question 1

The price of a pollution right is

Accepted Answer

A)  determined by consumers
B)  determined by government
C)  a user charge
D)  determined by supply and demand
E)  a subsidyF) B) and D)
G) A) and D)

Question 2

Most of the Superfund has been spent on

Accepted Answer

A)  education of the public on environmental issues
B)  research
C)  court costs and legal fees
D)  cleanup and rehabilitation of polluted areas
E)  development and installation of antipollution devicesF) B) and E)
G) A) and E)

Question 3

Dumping raw sewage into Boston Harbor is an example of

Accepted Answer

A)  a negative externality
B)  a positive externality
C)  a private cost
D)  a sunk cost
E)  an inverse costF) B) and D)
G) B) and E)

Question 4

Most of the EPA Superfund expenditures have gone for court costs and legal fees.

Accepted Answer

A) True 
 B)False

Question 5

According to Coase,

Accepted Answer

A)  government regulation will almost always be necessary to eliminate negative externalities
B)  externality problems can be solved efficiently by the assignment of property rights if transaction costs are low
C)  when bargaining costs are high, it is necessary to assign property rights
D)  assignment of property rights will lead to equitable but inefficient solutions to externality problems
E)  there really is no externality problem with renewable resourcesF) None of the above
G) D) and E)

Question 6

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Accepted Answer

A) True 
 B)False

Question 7

It is in the long-run economic interest of the world to preserve rainforests, but it is not in the short-run economic interest of the inhabitants of the countries involved to do so.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following provides a positive externality?

Accepted Answer

A)  smog
B)  inoculating children against measles
C)  hamburgers
D)  litter
E)  an increase in your earningsF) None of the above
G) B) and C)

Question 9

Mountain bikers and rollerbladers share the only trail in a city park.The city allows everybody into the park and onto the trail.The mountain bikers say the rollerbladers are a hazard to them; the rollerbladers say it's the other way around.Frequently there are collisions and many injuries occur.Which of the following ways of dealing with the problem does not implicitly grant someone a property right?

Accepted Answer

A)  Allow bikers to use the trail on odd-numbered days and rollerbladers to use it on even-numbered days.
B)  Allow bikers to use the trail in the morning and rollerbladers to use it in the afternoon.
C)  Allow only bikers in the park because they have invested in the more expensive sports equipment.
D)  Kick everybody out of the park.
E)  Build another trail, put rollerbladers on one and bikers on the other, and give bikers the right-of-way at intersections.F) D) and E)
G) B) and D)

Question 10

In order to increase society's well-being, education might be

Accepted Answer

A)  taxed to discourage production
B)  subsidized to encourage production
C)  taxed to encourage production
D)  subsidized to discourage production
E)  provided without government interventionF) D) and E)
G) B) and C)

Question 11

The optimal level of pollution is

Accepted Answer

A)  zero
B)  the level at which the marginal social cost of air quality equals the marginal social benefit
C)  the level at which the average social cost of air quality equals the average social benefit
D)  the level at which the total social cost of air quality equals the total social benefit
E)  the level at which the marginal social cost of air quality is minimizedF) A) and B)
G) B) and E)

Question 12

Markets fail when externalities are present

Accepted Answer

A)  because all of the costs and benefits of producing a good are reflected in the market price
B)  because some of the costs and benefits of producing a good are not reflected in the market price
C)  only if they are negative; positive externalities are not market failures
D)  because profits are not maximized
E)  if the positive externalities are less than the negative externalitiesF) A) and E)
G) A) and D)

Question 13

Oil is an example of a renewable resource.

Accepted Answer

A) True 
 B)False

Question 14

By current U.S.law, anyone generating, storing, or transporting hazardous waste must pay to clean it up if it leaks or is otherwise discharged into the environment.This law has been in effect

Accepted Answer

A)  since World War II
B)  since 1960
C)  since 1970
D)  since 1980
E)  only since 1990F) A) and E)
G) A) and D)

Question 15

Marginal social cost is equal to

Accepted Answer

A)  total private cost
B)  marginal private cost
C)  marginal external cost
D)  marginal private cost plus marginal external cost
E)  marginal private cost divided by marginal external costF) C) and D)
G) A) and C)

Question 16

Suppose that the city builds a new park that is advertised as being "open to the public, " and within two months the grass in the park is ruined by overuse.This would be an example of

Accepted Answer

A)  a nonrenewable resource
B)  a private good
C)  the common pool problem
D)  a positive externality
E)  a renewable and excludable resourceF) D) and E)
G) B) and D)

Question 17

Exhibit 17-8  Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions only on the marginal private benefit of education, how many years of education will they get?

Accepted Answer

A)  3 years
B)  4 years
C)  5 years
D)  6 years
E)  7 yearsF) None of the above
G) C) and D)

Question 18

In order to increase society's total welfare, a production process that produces a negative externality should be

Accepted Answer

A)  taxed
B)  provided by the government
C)  ignored
D)  subsidized
E)  exportedF) All of the above
G) A) and B)

Question 19

The optimal level of air quality

Accepted Answer

A)  is always zero
B)  occurs when the marginal social cost of air quality exceeds the marginal social benefit
C)  is greater if the marginal social benefit curve of air quality shifts rightward
D)  occurs when positive externalities are eliminated
E)  eliminates the common pool problemF) C) and D)
G) All of the above

Question 20

Mountain bikers and rollerbladers share the only trail in a city park.The city allows everyone into the park and onto the trail.The mountain bikers say the rollerbladers are a hazard to them; the rollerbladers say it's the other way around.Frequently there are collisions, and many injuries occur.What is the property rights problem?

Accepted Answer

A)  Rollerbladers do not have mountain bikes.
B)  Bikers do not have rollerblades.
C)  No one owns both bikes and blades.
D)  No one has property rights to the use of the trail.
E)  No one owns the park.F) C) and D)
G) C) and E)

Exam 17: Externalities and the Environment

Marginal social cost is equal to

Correct Answer
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The price of a pollution right is

Correct Answer
verified

The optimal level of pollution is

Correct Answer
verified

Most of the EPA Superfund expenditures have gone for court costs and legal fees.

Correct Answer
verified

Suppose that the city builds a new park that is advertised as being "open to the public, " and within two months the grass in the park is ruined by overuse.This would be an example of

Correct Answer
verified

It is in the long-run economic interest of the world to preserve rainforests, but it is not in the short-run economic interest of the inhabitants of the countries involved to do so.

Correct Answer
verified

According to Coase,

Correct Answer
verified

Correct Answer
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The optimal level of air quality

Correct Answer
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Dumping raw sewage into Boston Harbor is an example of

Correct Answer
verified

Most of the Superfund has been spent on

Correct Answer
verified

Which of the following provides a positive externality?

Correct Answer
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Oil is an example of a renewable resource.

Correct Answer
verified

By current U.S.law, anyone generating, storing, or transporting hazardous waste must pay to clean it up if it leaks or is otherwise discharged into the environment.This law has been in effect

Correct Answer
verified

In order to increase society's total welfare, a production process that produces a negative externality should be

Correct Answer
verified

Markets fail when externalities are present

Correct Answer
verified

Exhibit 17-8 Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions only on the marginal private benefit of education, how many years of education will they get?

Correct Answer
verified

Correct Answer
verified

In order to increase society's well-being, education might be

Correct Answer
verified

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Correct Answer
verified

Exam 17: Externalities and the Environment

Marginal social cost is equal to

Correct AnswerverifiedShow Answer

The price of a pollution right is

Correct AnswerverifiedShow Answer

The optimal level of pollution is

Correct AnswerverifiedShow Answer

Most of the EPA Superfund expenditures have gone for court costs and legal fees.

Correct AnswerverifiedShow Answer

Suppose that the city builds a new park that is advertised as being "open to the public, " and within two months the grass in the park is ruined by overuse.This would be an example of

Correct AnswerverifiedShow Answer

It is in the long-run economic interest of the world to preserve rainforests, but it is not in the short-run economic interest of the inhabitants of the countries involved to do so.

Correct AnswerverifiedShow Answer

According to Coase,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The optimal level of air quality

Correct AnswerverifiedShow Answer

Dumping raw sewage into Boston Harbor is an example of

Correct AnswerverifiedShow Answer

Most of the Superfund has been spent on

Correct AnswerverifiedShow Answer

Which of the following provides a positive externality?

Correct AnswerverifiedShow Answer

Oil is an example of a renewable resource.

Correct AnswerverifiedShow Answer

By current U.S.law, anyone generating, storing, or transporting hazardous waste must pay to clean it up if it leaks or is otherwise discharged into the environment.This law has been in effect

Correct AnswerverifiedShow Answer

In order to increase society's total welfare, a production process that produces a negative externality should be

Correct AnswerverifiedShow Answer

Markets fail when externalities are present

Correct AnswerverifiedShow Answer

Exhibit 17-8 Exhibit 17-8 represents the consumer market for higher education.If people base their education decisions only on the marginal private benefit of education, how many years of education will they get?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In order to increase society's well-being, education might be

Correct AnswerverifiedShow Answer

Some companies and celebrities are using a variant of pollution rights to become "carbon neutral."

Correct AnswerverifiedShow Answer

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