Question 1

When social costs of an activity exceed private costs

Accepted Answer

A)  a market failure exists.
B)  there is a tendency for resources to be under-utilized.
C)  this means that resources are being efficiently used.
D)  the actual price is above the efficient price.E) A) and B)
F) All of the above

Question 2

Which one of the following is an example of an external cost?

Accepted Answer

A)  the cost to attend college
B)  labor costs to a firm
C)  emissions from a factory
D)  a house payment owed by a friendE) None of the above
F) A) and C)

Question 3

Private property rights are

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.E) B) and D)
F) None of the above

Question 4

Which of the following statements is true about the relationship among external, internal and social costs?

Accepted Answer

A)  Social costs will always be higher than external costs.
B)  Social costs will always be higher than internal costs.
C)  Internal costs will always be higher than external costs.
D)  Internal costs will never equal external costs.E) None of the above
F) All of the above

Question 5

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.E) A) and B)
F) C) and D)

Question 6

Transaction costs are

Accepted Answer

A)  the costs, such as sales taxes, that are imposed by the government.
B)  equal to the hourly cost of a lawyer used to write a contract.
C)  the costs associated with making, reaching, and enforcing agreements.
D)  not true costs because they relate to time rather than real resources.E) All of the above
F) A) and D)

Question 7

The marginal cost of pollution abatement is the

Accepted Answer

A)  additional cost to clean up an additional unit of pollution.
B)  additional benefit from cleaning up an additional unit of pollution.
C)  total social costs of pollution clean-up divided by total social benefits.
D)  total social costs of pollution clean-up divided by the total units of clean-up.E) A) and B)
F) All of the above

Question 8

Which of the following was signed in the Kyoto Protocol?

Accepted Answer

A)  The Framework Convention on Climate Change
B)  The Zero Greenhouse Gas Agreement
C)  The Treaty on Global Warming
D)  The Emission Trading SchemeE) A) and D)
F) B) and C)

Question 9

When the private costs and the social costs are NOT the same, there is a(n)

Accepted Answer

A)  externality.
B)  internality.
C)  public good.
D)  monopoly.E) A) and B)
F) B) and D)

Question 10

There is an externality present only when

Accepted Answer

A)  private costs diverge from social costs.
B)  private benefits diverge from social benefits.
C)  private costs or benefits diverge from social costs or benefits.
D)  private costs equal social costs.E) B) and C)
F) A) and B)

Question 11

If firms were forced to take into account the full social costs of production, then

Accepted Answer

A)  output would decrease but pollution levels would probably remain at the same levels.
B)  output would be unaffected but pollution levels would come down.
C)  output and pollution levels would decrease.
D)  output could be increased and pollution levels would decrease.E) A) and B)
F) B) and C)

Question 12

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.E) All of the above
F) A) and B)

Question 13

Which of the following is FALSE?

Accepted Answer

A)  Social costs do not include private costs.
B)  Private costs do not include external costs.
C)  If social costs are greater than private costs, "too much" of a good is being produced.
D)  Pollution is a social cost.E) B) and D)
F) None of the above

Question 14

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

Accepted Answer

A)  $14
B)  $13
C)  $12.20
D)  $1.80E) A) and B)
F) A) and C)

Question 15

"Private costs are borne by individuals while social costs are borne by society." Do you agree or disagree? Why?

Accepted Answer

Disagree. Social costs are pri...

Question 16

Which of the following statements best defines private costs?

Accepted Answer

A)  They are internal in the sense that the firm or household must explicitly take them into account.
B)  They are costs borne by people other than those who commit the action.
C)  They are synonymous with social costs.
D)  They represent explicit costs incurred by business firms in the private sector.E) A) and B)
F) A) and C)

Question 17

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.E) All of the above
F) B) and C)

Question 18

-In the above figure, the optimal level of pollution cleanup is

Accepted Answer

A)    .
B)  Q2.
C)    .
D)    .E) B) and C)
F) A) and D)

Question 19

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

Accepted Answer

A)  continuing to overproduce the good, lowering the price of the good, or cutting output.
B)  reducing the pollution-causing activity, changing production techniques, or paying a price to pollute.
C)  installing pollution abatement equipment, paying to pollute, or just ignoring the issue.
D)  paying a pollution tax, continuing to use existing production techniques, or continuing the polluting behavior without regard to the social implications.E) C) and D)
F) B) and D)

Question 20

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

Accepted Answer

A)  the administrative costs are high.
B)  the cost of ascertaining the actual economic costs are relatively small.
C)  the economic damages are zero.
D)  the economic damages associated with the pollution are different across different locations.E) A) and C)
F) None of the above

Exam 31: Environmental Economics

When social costs of an activity exceed private costs

Correct AnswerverifiedShow Answer

The marginal cost of pollution abatement is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If firms were forced to take into account the full social costs of production, then

Correct AnswerverifiedShow Answer

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

Correct AnswerverifiedShow Answer

Which one of the following is an example of an external cost?

Correct AnswerverifiedShow Answer

Which of the following is FALSE?

Correct AnswerverifiedShow Answer

-In the above figure, the optimal level of pollution cleanup is

Correct AnswerverifiedShow Answer

Private property rights are

Correct AnswerverifiedShow Answer

Transaction costs are

Correct AnswerverifiedShow Answer

Air pollution is a problem because

Correct AnswerverifiedShow Answer

Which of the following statements is true about the relationship among external, internal and social costs?

Correct AnswerverifiedShow Answer

There is an externality present only when

Correct AnswerverifiedShow Answer

The social costs of an activity are greater than the private costs of the activity when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following was signed in the Kyoto Protocol?

Correct AnswerverifiedShow Answer

When the private costs and the social costs are NOT the same, there is a(n)

Correct AnswerverifiedShow Answer

Economists typically suggest three choices that allow a polluter to decide how to absorb most, or perhaps all, of the social costs of its actions, which are

Correct AnswerverifiedShow Answer

"Private costs are borne by individuals while social costs are borne by society." Do you agree or disagree? Why?

Correct AnswerverifiedDisagree. Social costs are pri...View AnswerShow Answer

Which of the following statements best defines private costs?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Disagree. Social costs are pri...
View Answer

Correct Answer
verified