Question 1

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 17-1 
-If technology is fixed, the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Accepted Answer

A)   subsidizing the production of the good by $10 per unit
B)   taxing the firm producing the good by $10 per unit
C)   using a quota system to encourage production of at least 160 units of the good
D)   using a quota system to restrict production of the good to no more than 160 units
E)   letting the private market operate freely to determine output at equilibrium

Question 3

Environmental problems result when social costs and benefits are different from private costs and benefits.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

The optimal level of pollution occurs where the marginal social benefit is equal to

Accepted Answer

A)   marginal private cost, which equals marginal social cost plus marginal external cost
B)   marginal social cost, which equals marginal private cost plus marginal external cost
C)   marginal external cost, which equals marginal private cost plus marginal social cost
D)   marginal private cost, which equals marginal social cost plus marginal internal cost
E)   marginal social cost, which equals marginal private cost plus marginal internal cost

Question 6

If in market equilibrium the marginal social cost of producing a good exceeds the marginal private cost,

Accepted Answer

A)   not enough of the product is being produced
B)   the price charged for the good is too high
C)   the good produces a positive externality
D)   the good produces a negative externality
E)   the government should produce the good

Question 7

The May 2007 report from the Intergovernmental Panel on Climate Change suggested reforms that would not require any lifestyle changes.

Accepted Answer

A) True 
 B)False

Question 8

The common pool problem

Accepted Answer

A)   occurs whenever goods are not rivals in consumption
B)   is an example of adverse selection
C)   arises whenever property rights are well defined
D)   is usually caused by government intervention into private markets
E)   is one in which resources to which access is unrestricted will tend to be overused

Question 9

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal,

Accepted Answer

A)   pollution would not be affected
B)   the price of pollution rights would rise, and the amount of pollution would decrease
C)   the price of pollution rights would fall, and the amount of pollution would decrease
D)   the price of pollution rights would fall, and the amount of pollution would increase
E)   the price of pollution rights would rise, and the amount of pollution would increase

Question 10

Education confers positive externalities because

Accepted Answer

A)   some education is done outside the market (i.e., in public schools) 
B)   curricula are regulated by the government, even in private schools
C)   an educated person consuming education gains many benefits he or she did not expect when the process started
D)   an educated person who has consumed education usually behaves in a way that benefits others
E)   education gives benefits to individuals in excess of the costs they pay to get it

Question 11

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

Accepted Answer

A)   The class has no property right to a quiet environment.
B)   The club has a property right on the ground floor.
C)   The class has a property right on the second floor.
D)   The club uses an inappropriate technology (i.e., no soundproofing) .
E)   Both the club and class are profitable.

Question 12

Exhibit 17-1 
-In Exhibit 17-1, the equilibrium level of output determined by private decisions is

Accepted Answer

A)   0 units
B)   100 units
C)   between 100 and 160 units
D)   160 units
E)   the answer cannot be determined from the information given

Question 13

Control of water pollution from pesticide runoff in the United States is the responsibility of

Accepted Answer

A)   the U.S. Department of Agriculture
B)   the Environmental Protection Agency
C)   state attorneys general
D)   state departments of agriculture
E)   state environmental protection agencies

Question 14

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)   exported

Question 15

At the market output and price for a good whose production causes pollution,

Accepted Answer

A)   pollution is eliminated
B)   the marginal social cost of production exceeds the marginal social benefit of production
C)   the private cost of production equals the private benefit of production
D)   the marginal social benefit of production equals the marginal social cost of production
E)   too little of the good is produced

Question 16

A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. It would cost the factory $5 million to move; it would cost $1 million for the day care center to move. Sound insulation for the factory costs $1 million; insulation for the day care center costs $200,000. The court determines that the day care center has the property right. What would be the optimal solution to this problem?

Accepted Answer

A)   The factory should install sound insulation because that is cheaper than moving.
B)   The factory should pay the day care center to move.
C)   The factory should buy insulation for the day care center.
D)   The day care center should buy its own insulation.
E)   The day care center should move.

Question 17

In the United States, federal efforts to clean up the environment are coordinated by the

Accepted Answer

A)   Environmental Protection Agency
B)   Department of the Interior
C)   State Department
D)   Department of Agriculture
E)   Department of Justice

Question 18

If education creates positive externalities,

Accepted Answer

A)   private markets provide less than the socially optimal quantity of education
B)   private markets provide more than the socially optimal quantity of education
C)   the marginal private benefit curve is higher than the marginal social benefit curve
D)   the marginal private cost curve is higher than the marginal social cost curve
E)   the government should impose a depletion tax

Question 19

Pollution taxes are paid out of the EPA Superfund in order to reduce automobile emissions.

Accepted Answer

A) True 
 B)False

Question 20

The Clean Air Act of 1970 has

Accepted Answer

A)   been ineffective in reducing lead emissions in automobiles
B)   actually caused an increase in auto emissions
C)   been fairly successful in reducing auto emissions, especially lead
D)   been unsuccessful in reducing auto emissions, especially sulfur oxides
E)   been ineffective in reducing carbon monoxide emissions from autos

Exam 17: Externalities and the Environment

Exhibit 17-1 -In Exhibit 17-1, the equilibrium level of output determined by private decisions is

Correct Answer
verified

In the United States, federal efforts to clean up the environment are coordinated by the

Correct Answer
verified

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

Correct Answer
verified

The May 2007 report from the Intergovernmental Panel on Climate Change suggested reforms that would not require any lifestyle changes.

Correct Answer
verified

At the market output and price for a good whose production causes pollution,

Correct Answer
verified

Correct Answer
verified

Education confers positive externalities because

Correct Answer
verified

The common pool problem

Correct Answer
verified

Exhibit 17-1 -If technology is fixed, the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Correct Answer
verified

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity.

Correct Answer
verified

Pollution taxes are paid out of the EPA Superfund in order to reduce automobile emissions.

Correct Answer
verified

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal,

Correct Answer
verified

If in market equilibrium the marginal social cost of producing a good exceeds the marginal private cost,

Correct Answer
verified

If education creates positive externalities,

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The optimal level of pollution occurs where the marginal social benefit is equal to

Correct Answer
verified

The Clean Air Act of 1970 has

Correct Answer
verified

Control of water pollution from pesticide runoff in the United States is the responsibility of

Correct Answer
verified

Environmental problems result when social costs and benefits are different from private costs and benefits.

Correct Answer
verified

Exam 17: Externalities and the Environment

Exhibit 17-1 -In Exhibit 17-1, the equilibrium level of output determined by private decisions is

Correct AnswerverifiedShow Answer

In the United States, federal efforts to clean up the environment are coordinated by the

Correct AnswerverifiedShow Answer

A meditation class meets on the second floor of a building; the first floor is a nightclub. The loud music from the club disturbs the classes. Which of the following best explains why the negative externality faced by the class arises?

Correct AnswerverifiedShow Answer

The May 2007 report from the Intergovernmental Panel on Climate Change suggested reforms that would not require any lifestyle changes.

Correct AnswerverifiedShow Answer

At the market output and price for a good whose production causes pollution,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Education confers positive externalities because

Correct AnswerverifiedShow Answer

The common pool problem

Correct AnswerverifiedShow Answer

Exhibit 17-1 -If technology is fixed, the discrepancy between the private equilibrium and the efficient level of output in Exhibit 17-1 is best eliminated by

Correct AnswerverifiedShow Answer

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity.

Correct AnswerverifiedShow Answer

Pollution taxes are paid out of the EPA Superfund in order to reduce automobile emissions.

Correct AnswerverifiedShow Answer

Suppose environmental groups pressure the local government to reduce the number of pollution rights to be sold. Other things equal,

Correct AnswerverifiedShow Answer

If in market equilibrium the marginal social cost of producing a good exceeds the marginal private cost,

Correct AnswerverifiedShow Answer

If education creates positive externalities,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The optimal level of pollution occurs where the marginal social benefit is equal to

Correct AnswerverifiedShow Answer

The Clean Air Act of 1970 has

Correct AnswerverifiedShow Answer

Control of water pollution from pesticide runoff in the United States is the responsibility of

Correct AnswerverifiedShow Answer

Environmental problems result when social costs and benefits are different from private costs and benefits.

Correct AnswerverifiedShow Answer

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