Question 1

Exhibit 17-6 
-Exhibit 17-6 illustrates the presence of

Accepted Answer

A)   positive externalities
B)   positive and negative externalities
C)   negative externalities
D)   the Coase theorem
E)   a private market with a socially efficient equilibrium

Question 2

To maximize social welfare in the presence of a negative externality, marginal __________ must equal marginal __________.

Accepted Answer

A)   social cost; private cost
B)   private cost; social cost
C)   social cost; social benefit
D)   private cost; social benefit
E)   social cost; external cost

Question 3

The Clean Air Act of 1970

Accepted Answer

A)   set up a depletion tax system
B)   reduced air pollution standards
C)   recognized air as a resource
D)   established a system of transferable pollution rights
E)   forbade producers to emit any pollutants into the air

Question 4

Robert Iwasaki lives next door to a toxic waste landfill. Katie Cooley lives five miles downstream from a steel plant that dumps waste into Mill Creek. Which person is more likely to press public officials for a cleaner environment?

Accepted Answer

A)   Katie
B)   Robert
C)   neither
D)   both equally
E)   Economics cannot answer this question

Question 5

When consumption of a good creates positive externalities,

Accepted Answer

A)   the private demand curve shifts rightward
B)   the private demand curve shifts leftward
C)   the private demand curve is below the marginal social benefit curve
D)   the private demand curve is above the marginal social benefit curve
E)   the equilibrium quantity determined by the free private market is too high

Question 6

The economic efficiency approach to emission control provides the polluting firm with

Accepted Answer

A)   a license produce as much emissions as it wants
B)   the option of choosing between focusing on profit or cost
C)   a process for determining the optimum quantity of emissions
D)   more flexibility in selecting the most cost effective method of control
E)   a subsidy for producing additional emissions

Question 7

If a private market determines the quantity of smallpox vaccinations, which of the following is true?

Accepted Answer

A)   The equilibrium quantity is too low for efficiency.
B)   The equilibrium price and quantity are too high for efficiency.
C)   The equilibrium price is efficient.
D)   The equilibrium quantity is too high for efficiency.
E)   The equilibrium price and quantity are efficient.

Question 8

According to the Coase theorem, in order to solve a negative externality problem efficiently,

Accepted Answer

A)   the property right must be assigned to the party with the least-cost alternative
B)   the property right must be assigned to the victim of pollution
C)   transaction costs must be high
D)   transaction costs must be low
E)   property rights must be determined by the courts

Question 9

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 externalities

Question 10

When the free market produces less than the socially optimal quantity of a good,

Accepted Answer

A)   negative externalities must be present
B)   marginal social cost must exceed marginal private cost
C)   marginal private benefit must exceed marginal social benefit
D)   the government should tax production of the good
E)   there has been a market failure

Question 11

Renewable resources are those for which

Accepted Answer

A)   additional units can be purchased in the market
B)   additional units can be purchased in the market or provided by government
C)   worn-out units can be repaired for further use
D)   periodic use can be continued indefinitely
E)   additional sources are constantly being discovered

Question 12

If the benefits to society of students attending college exceed benefits to the students,

Accepted Answer

A)   higher education should be strictly regulated
B)   higher education should be taxed
C)   higher education provides a positive externality
D)   higher education is overproduced at the privately determined equilibrium
E)   in time, no higher education will be produced

Question 13

In the United States, what percentage of smog comes from manufacturing sites?

Accepted Answer

A)   5 percent
B)   15 percent
C)   25 percent
D)   40 percent
E)   80 percent

Question 14

Suppose research indicates that the effects of a one degree increase in Earth's average temperature would be much more devastating than previously believed. Therefore, the greater the marginal benefit of reducing greenhouse gases, other things constant,

Accepted Answer

A)   the lower the optimal level of emissions
B)   the higher the optimal level of emissions
C)   the likelier that the level of emissions would have no effect
D)   the lower the optimal level of cleaner air
E)   None of the answers is correct

Question 15

Exhibit 17-8 
-Exhibit 17-8 represents the consumer market for higher education. If people base their education decisions on the marginal social 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 years

Question 16

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 intervention

Question 17

How much of U.S. garbage is disposed of in landfills?

Accepted Answer

A)   25 percent
B)   40 percent
C)   60 percent
D)   70 percent
E)   100 percent

Question 18

A pollution tax

Accepted Answer

A)   is itself a form of negative externality
B)   is a positive externality used to offset a negative one
C)   is a price per unit of discharge of pollution
D)   is a tax on pollution control equipment
E)   may cause a common pool problem

Question 19

Exhibit 17-2 
-In Exhibit 17-2, the socially efficient price and level of output are

Accepted Answer

A)   $6 and 50 units, respectively
B)   $12 and 50 units, respectively
C)   $12 and 40 units, respectively
D)   $6 and 40 units, respectively
E)   not indicated

Question 20

If producers cannot afford the fees for pollution rights,

Accepted Answer

A)   they will pollute
B)   they will buy pollution rights
C)   they will sell pollution rights
D)   they will have to find a cheaper way to deal with their pollution
E)   they will not be able to use their pollution rights

Exam 17: Externalities and the Environment

Exhibit 17-2 -In Exhibit 17-2, the socially efficient price and level of output are

Correct AnswerverifiedShow Answer

Exhibit 17-6 -Exhibit 17-6 illustrates the presence of

Correct AnswerverifiedShow Answer

Suppose research indicates that the effects of a one degree increase in Earth's average temperature would be much more devastating than previously believed. Therefore, the greater the marginal benefit of reducing greenhouse gases, other things constant,

Correct AnswerverifiedShow Answer

If producers cannot afford the fees for pollution rights,

Correct AnswerverifiedShow Answer

When the free market produces less than the socially optimal quantity of a good,

Correct AnswerverifiedShow Answer

How much of U.S. garbage is disposed of in landfills?

Correct AnswerverifiedShow Answer

To maximize social welfare in the presence of a negative externality, marginal __________ must equal marginal __________.

Correct AnswerverifiedShow Answer

According to the Coase theorem, in order to solve a negative externality problem efficiently,

Correct AnswerverifiedShow Answer

If a private market determines the quantity of smallpox vaccinations, which of the following is true?

Correct AnswerverifiedShow Answer

Renewable resources are those for which

Correct AnswerverifiedShow Answer

The economic efficiency approach to emission control provides the polluting firm with

Correct AnswerverifiedShow Answer

If the benefits to society of students attending college exceed benefits to the students,

Correct AnswerverifiedShow Answer

Robert Iwasaki lives next door to a toxic waste landfill. Katie Cooley lives five miles downstream from a steel plant that dumps waste into Mill Creek. Which person is more likely to press public officials for a cleaner environment?

Correct AnswerverifiedShow Answer

Markets fail when externalities are present

Correct AnswerverifiedShow Answer

In the United States, what percentage of smog comes from manufacturing sites?

Correct AnswerverifiedShow Answer

When consumption of a good creates positive externalities,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Clean Air Act of 1970

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A pollution tax

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

To maximize social welfare in the presence of a negative externality, marginal must equal marginal .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified