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1. The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange. A. social costs |
B. spillover |
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2. Using the term "spillover" is a less formal means of describing A. an externality. |
A. an externality. |
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3. ____________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A. Negative externality |
A. Negative externality |
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4. A positive externality arises in a situation where a third party, outside the transaction, A. fails to allocate resources efficiently. |
C. benefits from a market transaction by others. |
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5. _______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A. Social costs |
A. Social costs |
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6. Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. A. remains outside the transaction |
C. fails to allocate resources efficiently |
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7. Command-and-control regulation is a body of law that A. fails to consider private costs of firms. |
D. can include both b and c. |
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8. A pollution charge is a form of tax imposed on A. the quantity of pollution that a firm emits. |
A. the quantity of pollution that a firm emits. |
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9. Property rights are the legal rights of ownership on which others are A. allowed to infringe by paying the property owner’s pollution tax. |
D. not allowed to infringe without paying compensation. |
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10. Which of the following is used to describe the full spectrum of animal and plant genetic material? A. ecodiversity |
B. biodiversity |
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11. Which of the following is an example of economic output that can injure the environment? A. gold mine discharging arsenic into a natural lake it’s using for a tailings pond |
D. radio-active waste leaking into a river, and all of the above |
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12. The problem of pollution typically arises in ______________ economies around the world. A. high-income |
C. high or low-income |
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13. The problem of pollution arises in primarily ______________ economies around the world. A. command-oriented |
D. both a and b |
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14. Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? A. high-income, market-oriented economies |
B. low incomes and command economies |
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15. Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output? A. the European Union |
A. the European Union |
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16. Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has A. steadily declined. |
C. steadily improved. |
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17. The number of people served by advanced wastewater treatment plants doubled between 1968 and the mid-1990s, but because the treatment plants _______________________, the quantity of waste emitted into the water after treatment ___________________ . A. became so much more effective; decreased by about one-third |
A. became so much more effective; decreased by about one-third |
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18. In addition to the current levels of air and water pollution, a list of important environmental issues would most likely include: A. emissions of greenhouse gases |
D. extinction of species and all of the above |
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19. Around the world, the cities with the dirtiest air and water are typically found in ___________________________ . A. high-income countries like France and the U.S. |
C. low-income countries in Africa and Asia |
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20. Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? A. countries with high-incomes |
B. every country |
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21. Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies? A. the range of flexible, market-oriented pollution control policies are flawed |
C. it isn’t required to pay any of the cost of cleaning up its pollution |
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22. Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted. A. eliminating the risk that any |
B. setting limits for how much of each |
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23. While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to A. a range of more flexible, market-oriented pollution control policies. |
A. a range of more flexible, market-oriented pollution control policies. |
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24. Which of the following is viewed as a fundamental building block of the U.S. economic way of thinking? |
D. the principle that a system of voluntary exchange benefits both parties |
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25. If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day A. is a voluntary exchange. |
C. would be a negative externality. |
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26. Which of the following would be classified as a situation where a third party benefits from a market transaction by others? A. City buying 10,000 trees for green space renewal projects. |
A. City buying 10,000 trees for green space renewal projects. |
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27. If pollutants are emitted into the air and water, what costs might be incurred as a result? A. compromised recreation possibilities |
D. health injuries and all of the above |
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28. If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes, A. its supply curve will be based on perceived benefits of maximizing utility. |
B. it is factoring in the social costs of the pollution it generates. |
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29. If no externalities of pollution exist in a particular industry, the interaction of demand and supply _________________________ . A. is based on benefits individuals perceive while maximizing utility |
C. will coordinate social costs and benefits |
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30. If an externality of pollution exists for all manufacturers in a given industry, then all related social costs A. are no longer represented in their supply curves. |
A. are no longer represented in their supply curves. |
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31. Why do U.S. economists commonly refer to externalities as an example of market failure? A. firms that are required to pay social costs of externalities produce more |
C. externalities present a case where markets only consider some social costs |
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32. Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: A. each would create less pollution |
D. the price of goods will rise and a and b above |
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33. Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ . A. positive regulations |
A. positive regulations |
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34. The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government A. stipulated mandatory use of particular pollution-control technologies. |
A. stipulated mandatory use of particular pollution-control technologies. |
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35. To be effective, U.S. command-and-control environmental regulation required A. social costs of industrial pollution to become unavoidable business costs. |
D. the EPA to oversee all environmental laws and all of the above. |
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36. In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time, A. were necessary as US industries had zero incentive to control pollution. |
C. are given considerable credit for cleaner air and water in recent decades. |
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37. Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? A. high degree of inflexibility |
A. high degree of inflexibility |
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38. While the U.S. command-and-control environmental regulations initiated in the 1970s have been very effective at reducing pollution, some economists have difficulty with the legislation because A. it often requires different pollution-control technology for each polluter. |
C. it is full of fine print and exceptions, and costly for some firms to comply with. |
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39. The arguments presented by economists regarding U.S. environmental command-and-control regulations generally A. accept the goal of reducing pollution. |
D. lack flexibility and a and b above. |
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40. Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives. A. draw distinctions; lower the social costs incurred |
C. create incentives; allow firms some flexibility |
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41. The main categories of market-oriented approaches to pollution control are A. redefined property rights; pollution permits; marketable charges. |
B. marketable permits; better-defined property rights; pollution charges. |
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42. A pollution charge gives the trucking industry an incentive to reduce its emissions, as long as the _____________ of reducing the emissions is _______________ . A. total cost; less than the tax |
C. marginal cost; less than the tax |
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43. The objective of imposing a higher pollution tax is to A. ensure firms have pollution charge credits for all reduced emissions. |
C. provide adequate incentive for firms to reduce their emissions by more. |
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44. A ___________________ would lead a large greenhouse gas emitter to reduce emissions by less. A. flat charge |
C. lower pollution tax |
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45. Those firms in the oil refining industry that can reduce pollution __________________ will do so _______________________ . A. for a flat charge; at the industrial level |
B. cheaply and easily; to minimize their pollution taxes |
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46. If a glass manufacturer has only a few ________________ of reducing pollutants, it will ____________________ . A. costly ways; end up paying the pollution tax. |
A. costly ways; end up paying the pollution tax. |
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47. The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like A. an incentive to throw bottles and cans in the trash. |
D. a pollution tax incentive to avoid littering. |
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48. Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation. A. marketable permit; less cost-effective way |
B. pollution tax; flexible, more cost-effective way |
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49. If a government wants to establish a marketable permit program, it must begin by determining A. how many permits will be issued in the overall market. |
C. the overall quantity of a certain pollutant that will be allowed. |
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50. If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will A. take place in the firms where it is least expensive to do so. |
A. take place in the firms where it is least expensive to do so. |
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51. The flexibility of marketable permits program developed for the oil refining industry is credited with achieving the reduction in lead pollution for __________ less cost than command-and-control regulation would have required. |
D. at least 20% |
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52. Why was the Clean Air Act amended in 1990? A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels |
A. to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels |
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53. What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants? A. shrinkable marketable permits |
D. both a and b above |
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54. Environmentalist groups tend to prefer ________________ to ___________________. A. command-and-control regulations; marketable permits |
B. marketable permits; pollution charges |
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55. Environmentalist groups act to directly reduce of emissions by A. allowing a limited amount of pollution to occur. |
C. buying marketable emission permits and not re-selling them. |
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56. An economist is more likely to identify __________________ as a more efficient and flexible way for society to __________________________ . A. marketable permits; allow a limited, declining amount of pollution to occur |
A. marketable permits; allow a limited, declining amount of pollution to occur |
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57. One concern that environmentalists have is that market-oriented environmental tools are A. an inflexible took that won’t reduce pollution levels. |
C. an excuse to allow pollution to be maintained or to grow. |
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58. Market-oriented environmental policies are ________, and __________ will work better in some situations than in others. A. a tool-kit; specific tools |
A. a tool-kit; specific tools |
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59. Marketable permits work best when there are _____________________ permit holders who are highly interested in trading. A. several dozen or a several hundred |
D. a few dozen or a few hundred |
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60. Marketable permits can be viewed as a form of improved _______________. A. command-and-control regulations |
B. property rights |
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61. When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of A. command-and-control regulation. |
C. permit to pollute. |
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62. The property rights approach to environmental issues often becomes highly relevant in cases involving __________________. A. greenhouse gas emissions |
C. endangered species |
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63. In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels. A. marketable permits |
B. pollution charges |
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64. The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife spend over A. $450 billion per year. |
A. $450 billion per year. |
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65. Some of the leading ecotourism destinations include: A. Costa Rica and Panama in Central America |
D. the Caribbean, New Zealand and all of the above |
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66. With respect to the benefits of clean air and water, which of the following would most likely be classified as being relatively easy to value in economic terms? A. gains in farming, fishing and tourism |
A. gains in farming, fishing and tourism |
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67. When making decisions about what safety systems should be required in cars or airplanes, the ___________________ will only approve rules where the estimated cost per life saved is __________ or less. A. U.S. Senate; $5 million |
C. Environmental Protection Agency; $3 million |
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68. A study by the Environmental Protection Agency looked at the costs and benefits of the Clean Air Act from 1970 to 1990. This study found that a middle-range estimate of the health and other benefits from cleaner air was $22 trillion. This amount was about __________________ than the costs of reducing the pollution. A. 10 time lower |
B. 44 times higher |
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69. When the quantity of environmental protection is low so that pollution is extensive, then there are usually ______________ to reduce pollution and the ______________ . A. a few inexpensive and easy ways; average benefit are slightly higher |
D. a lot of cheap and easy ways; marginal benefits of doing so are quite high |
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70. As environmental protection increases, A. the biggest marginal benefits are achieved first, smaller marginal benefits follow. |
D. in addition to a and b above, the quality of environmental protection increases. |
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71. Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the _____________________ and the __________________ . A. marginal benefits are least; marginal costs are greatest |
B. marginal benefits are greatest; marginal costs are least |
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72. The challenge of preserving biodiversity, A. any nation itself can reduce emissions to solve global warming. |
D. a nation can protect biodiversity within its own borders and c. |
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73. Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ . A. a different approach to negotiations; similar income levels and sets of priorities |
B. a difficult set of negotiations; different income levels and sets of priorities |
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74. Low and middle-income societies correctly point out that high-income countries have historically A. been the primary contributors to greenhouse warming. |
D. legitimately lacked moral standing in addition to all the above. |
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75. If market-oriented environmental tools offer a mechanism or providing either the same environmental protection at lower cost, or providing a greater degree of environmental protection for the same cost, then this ___________ will arise for ________________ . A. spillover; market-oriented countries |
C. trade-off; all countries around the globe |
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76. A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A negative externality that can result is A. the cost of the bee hives to the beekeeper. |
B. the possibility of the bees stinging the students at the school. |
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77. A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is A. the cost of the bee hives to the beekeeper. |
C. the bees helping to pollinate the orchard, leading to more fruit. |
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78. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. A. Price = $55, Quantity = 30 |
D. Price = $30, Quantity = 80 |
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79. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. A. Price = $55, Quantity = 30 |
A. Price = $55, Quantity = 30 |
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80. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that shows how much it would cost each company to reduce its pollution by additional increments of 10 pounds. A. $5, $2 |
B. $10, $4 |
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81. Kip and Yale run separate mining companies in the same forest. Both pollute the river flowing through the forest with debris from their work. In the table below, the first row shows the current level of debris that makes its way into the river from their work. The following table set out information that show how much it would cost each company to reduce its pollution by additional increments of 10 pounds. A. $40 |
C. $50 |
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82. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with waste from their manufacturing processes. In the table below, the first row shows the current level of waste that makes its way into the river from their respective operations. The table also sets out information that indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. A. $7 |
C. $21 |
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83. Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with debris and waste from their manufacturing processes. In the table below, the first row shows the current level of debris and waste each produces that makes its way into the river. The information in the table also indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. A. 40; $28 |
B. 40; $17 |
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84. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. In the table below, the first row of shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. A. $167 |
A. $167 |
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85. Four companies, Alpha, Beta, Gamma and Delta, are burning coal to produce electricity. As a result, they also produce emissions. The first row of the table below shows the total pounds of emissions currently produced by each firm. The other rows of the table show the cost for each firm of reducing emissions by the first 50 tons, the second 50 tons, and so on. The government wants to reduce emissions by one third, and does so by issuing marketable permits based on the current level of emissions where the permits will shrink the allowable amount of pollution by one third. A. 50, 150, 50, 250, $130 |
B. 50, 200, 0, 250, $150 |
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86. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner’s dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. A. protect, protect |
D. not protect, not protect |
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87. Michigan (MI) and Wisconsin (WI) both border Lake Michigan. Both states pollute Lake Michigan and both states suffer the consequences of the pollution. However, the two states face a prisoner’s dilemma of the sort studied in Chapter 12. Each country must decide whether to protect or not to protect Lake Michigan from pollution. The payoffs from the choices are shown in the table below. A. neither state choosing to protect the lake |
A. neither state choosing to protect the lake |
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88. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society’s point of view. The payoffs facing these companies are given in the table below. A. cut, do not cut |
B. cut, cut |
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89. Two logging companies are deciding whether or not to cut down a significant portion of a particular forest that both have access too. Both companies understand the environmental consequences of their actions, knowing that they are trading off higher profits for a better outcome from society’s point of view. The payoffs facing these companies are given in the table below. |
D. both companies choosing to cut the forest |
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90. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. A. 30 million tons |
C. 10 million tons |
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91. A country is currently creating 40 million tons of toxic waste per year. The table below shows the marginal costs and benefits of reducing the amount of toxic waste to various amounts. A. 700 |
D. 1500 |
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92. Ireland and England both fish in the Irish Sea. If this sea is over-fished, the fish stocks will fall and fish will eventually become extinct. Both countries have to decide whether to fish a lot or a little. The payoffs are given in the table below. A. both countries choosing to fish a little, prisoners dilemma |
C. both countries choosing to fish a lot, prisoner’s dilemma |
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93. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. A. A |
B. B |
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94. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. A. E |
A. E |
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95. Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. A. A |
D. D |
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96. 35. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. If both firms install the filters, then Boing will earn ________ and Twang will earn ________ . A. $0 million, $0 million |
C. $5 million, $5 million |
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97. 36. Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. In the absence of any government intervention or agreement between the firms, A. both firms will install filters |
D. neither firm will install a filter |
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