Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Pollution and other negative externalities arise because A) | there are no
enforceable property rights to open-access resources | B) | legislators
cannot agree on what to do about them | C) | they are the price consumers are willing to pay for production
of goods and services | D) | private property rights to pollute are controlled by
businesses | E) | science cannot decide how to control
them | | |
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2.
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If
tuna in the sea are open-access resources, they will be used until the marginal value of additional
use equals A) | the marginal
product of the resource | B) | the marginal revenue of the resource | C) | infinity | D) | negative infinity | E) | zero | | |
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3.
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The
common pool problem 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 | | |
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4.
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When
a resource is an open-access resource, A) | each individual in the society owns
it | B) | the group owns
it | C) | no one owns
it | D) | the government
owns it | E) | some nonprofit agency owns it | | |
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5.
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If at
market equilibrium the marginal social cost of producing a good exceeds the marginal private
cost, 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 | | |
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6.
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The
socially optimal level of output of a good with an externality occurs when A) | the marginal
private costs of production are equal to marginal private revenues | B) | the firm
maximizes its profits | C) | the consumer maximizes his or her
utility | D) | the marginal social cost of production equals the marginal
social benefit of the good | E) | the firm is making a normal profit | | |
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7.
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Marginal external costs are A) | additional unpriced costs imposed on society by producing one
more unit of a good | B) | the cost of damaged goods | C) | the additional
cost of imported goods | D) | the total cost to society of producing a
good | E) | the marginal
cost divided by the marginal revenue | | |
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8.
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As
more pollution is abated, the marginal social benefit from further abatement
diminishes.
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9.
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If a
government regulation states that fluorocarbon emissions should be abated by 75 percent but the
optimal level of pollution abatement is 85 percent, which of the following must be
true? A) | The free market
will not reduce pollution by less than 85 percent. | B) | The free market
will accomplish 85 percent abatement, but it will be inefficient. | C) | If only 75
percent of the pollution is abated, the society will be better off than if 85 percent had been
abated. | D) | If only 75 percent of the pollution is abated, the society will
be worse off than if 85 percent had been abated. | E) | If 75 percent of
the pollution is abated, then in the next period the government should set the abatement level at 95
percent. | | |
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10.
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The
basic difference between the command-and-control regulatory approach and the economic efficiency
approach is that the economic efficiency approach A) | provides more flexibility because it offers each firm the
flexibility to meet the requirements given their unique cost structures | B) | provides firms
with an option of attempting to maximize profits or minimize costs to meet the
requirements | C) | requires more governmental monitoring than does the
command-an-control regulatory approach to emission control | D) | leads to a
higher level of air quality, but it is impossible to say how the social benefit of air quality levels
would be affected because only the costs have decreased | E) | leads to a lower
level of air quality because the firm can afford to produce more paper now | | |
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11.
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The
economic efficiency approach to emission control provides the firm with A) | a free rider to
produce as much emissions as they want so long as they get government
approval | B) | the option of choosing between focusing on profits or
costs | C) | a process for determining the optimum quantity of
emissions | D) | more flexibility in selecting the most cost effective
method | E) | none of the above | | |
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12.
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It is
in the long-run economic interest of the world to preserve rain forests, but it is not in the
short-run economic interest of the inhabitants of the countries involved to do so.
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13.
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The
cutting down of tropical rain forests A) | provides long-term benefits to
loggers | B) | may mean that possible cures for cancer are
lost | C) | diminishes
potential oil reserves | D) | means a reduction of carbon dioxide in the
atmosphere | E) | means less erosion | | |
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14.
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Mountain bikers and rollerbladers share the only trail in Lady Bird Johnson Park, a
city-owned 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. What is the property rights problem? A) | Rollerbladers
don't have mountain bikes. | B) | Bikers don't have rollerblades. | C) | Nobody owns both
bikes and blades. | D) | Nobody has property rights to the use of the
trail. | E) | Nobody owns the hospital. | | |
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15.
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Puerta Vallarta International Airport is near the coast. At night planes take off and
land from the west, over the water. During the day planes approach and leave from the east, over
Puerta Vallarta neighborhoods. This situation implies that residents have property rights
to A) | the space above
their homes at all times | B) | the space over the ocean | C) | the use of the
airport | D) | peace and quiet at night | E) | airplanes in the
daytime | | |
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16.
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A
metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible
for the kids to nap. What would be the optimal solution to this problem? A) | The factory
should move. | B) | The day care center should move. | C) | The factory
should install sound insulation. | D) | The day care center should install sound
insulation. | E) | We cannot determine the solution without more
information. | | |
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17.
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When
a system of pollution rights is in effect, polluters have no economic incentive to reduce the amount
of pollution they generate.
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18.
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Other
things equal, if the government increased the quantity of pollution rights to be
sold, A) | pollution would
not be affected | B) | the price of pollution rights would rise, and pollution would
fall | C) | the price of
pollution rights would fall, and pollution would also fall | D) | the price of
pollution rights would fall, and pollution would rise | E) | the price of
pollution rights would rise, and pollution would rise | | |
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19.
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In
the United States, what percentage of smog comes from manufacturing sites? A) | 5
percent | B) | 15 percent | C) | 25
percent | D) | 40 percent | E) | 80
percent | | |
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20.
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In
the United States, what percentage of smog comes from automobiles? A) | 5
percent | B) | 15 percent | C) | 25
percent | D) | 40 percent | E) | 80
percent | | |
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21.
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Pollution is most severe in the less-developed countries.
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22.
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Mexico City's high elevation A) | eliminates its air pollution problem in the
winter | B) | increases the ratio of pollutants to oxygen in its
air | C) | reduces its air
pollution problem year-round | D) | raises the oxygen levels to hide the
pollutants | E) | none of the above | | |
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23.
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To
help reduce pollution in Mexico City, A) | officials raised the price of gasoline in
Mexico | B) | the government imposed a pollution tax on automobile
drivers | C) | stricter regulations have been imposed on business
activity | D) | smoking has been prohibited during daylight
hours | E) | the government has assigned property rights to the
air | | |
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24.
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Some
U.S. cities still dump raw sewage directly into rivers or oceans.
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25.
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More
water pollution in the United States comes from __________ than any other source. A) | factories | B) | sulfur dioxide (i.e., acid rain) | C) | cars | D) | chemicals (used in pesticides and fertilizers) and
sewage | E) | garbage | | |
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26.
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Most
of the EPA Superfund dollars have gone for court costs and legal fees.
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27.
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How
much of U.S. garbage is disposed of in landfills? A) | 25 percent | B) | 40
percent | C) | 60 percent | D) | 75
percent | E) | 100 percent | | |
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28.
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In
Japan most garbage is A) | either recycled or burned | B) | recycled | C) | burned | D) | deposited in
landfills | E) | used for fuel | | |
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29.
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Which
of the following did not help account for the recent decline in the growth of trash-to-energy
plants? A) | a decline in
energy prices | B) | less favorable tax treatment | C) | a decline in the
amount of garbage per capita | D) | the 1986 tax reform act | E) | environmental
concerns over sites for the plants | | |
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30.
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Most
waste generated in the U.S. ends up in landfills because A) | the low
opportunity cost of time discourages recycling | B) | Americans earn
low incomes | C) | the price of land is relatively low | D) | the low wages in
the repair industry encourages repairs | E) | of low productivity and high wages in the waste disposal
industry | | |
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31.
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When
consuming a good creates positive externalities, A) | private demand increases | B) | private demand
decreases | C) | the private demand curve overstates the marginal social benefit
of the good | D) | the private demand curve understates the marginal social
benefit of the good | E) | the equilibrium quantity increases without government
intervention | | |
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32.
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In
Exhibit 0226, the socially efficient production level is A) | 0
units | B) | 10 units | C) | 20
units | D) | 40 units | E) | 50
units | | |
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33.
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Exhibit 0226 illustrates the presence of A) | positive
externalities | B) | positive and negative externalities | C) | negative
externalities | D) | the Coase theorem | E) | a private market
with a socially efficient equilibrium | | |
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34.
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In
Exhibit 0226, an unregulated market would produce A) | 0 units | B) | 10
units | C) | 20 units | D) | 40
units | E) | 50 units | | |
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35.
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In
Exhibit 0226, a per-unit subsidy of __________ would result in production of the socially optimal
quantity. A) | $4 | B) | $6 | C) | $2 | D) | $1.50 | E) | $3.00 | | |
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